Bitcoin Faces Consolidation as Liquidity Concerns Weigh on Market

Bitcoin recent correction has cast doubt on whether the leading cryptocurrency will revisit its January all-time high (ATH) of $109,000 anytime soon. Analysts suggest that Bitcoin is now in a pullback phase, likely leading to an extended period of consolidation before any major recovery.

In a March 5 report, CryptoQuant analyst XBTManager noted that the market’s current liquidity constraints make a rapid rebound less likely. He advised traders to brace for a cautious market environment in the coming months. “We should assume that we are in the pullback phase after the ATH and will likely continue to consolidate for some time due to liquidity needs,” XBTManager stated.

Bitcoin Long-Term Holders Hold the Key

A critical factor influencing Bitcoin’s trajectory is the behavior of long-term holders. According to XBTManager, Bitcoin’s ability to resume an upward trend depends on when long-term investors begin accumulating again. Currently, short-term holders—those who have held BTC for less than 155 days—are offloading their assets, which contributes to selling pressure.

For long positions to become favorable, long-term holders must start increasing their supply. Until then, the analyst warns against engaging in high-risk trades, emphasizing that traders should be cautious and avoid aggressive market exposure.

Historical data suggests that Bitcoin’s supply dynamics shift significantly during major price movements. Before Bitcoin’s January ATH, short-term holders increased their supply, while long-term investors began selling to capitalize on profits. This pattern repeated in December when Bitcoin first crossed $100,000, leading to a decline in long-term holder supply.

On Dec. 1, long-term holders collectively held 15.2 million BTC, but by Dec. 20, that number had dropped to 14.7 million. As of now, long-term holders control approximately 14.4 million BTC—an 800,000 BTC decline since early December.

Macroeconomic Pressures

At the time of writing, Bitcoin is trading around $87,600, reflecting a broader market struggle amid macroeconomic uncertainty. A factor in Bitcoin’s recent dip below $100,000 was growing concern over a potential trade war following U.S. President Donald Trump’s proposed tariffs.

On Feb. 4, Bitcoin fell below six figures as these fears took hold, and on Feb. 27, the market reacted further, sending the price down to $85,000. That same day, Bitcoin briefly dipped below the critical $80,000 level, effectively wiping out nearly all the gains made since Trump’s election victory in November.