The decline in the price of bitcoin following the rally has unearthed some underlying weaknesses that were not easily seen before. The run-up and eventual rundown from $25,000 have shown that retail investors are not as moved by the market as expected. Even now, transaction volumes for retail investors remain muted, indicating that the burnout from the rally was actually a result of low bullish sentiment.

In a recent report, Glassnode points to the low retail volume as an indicator of the weakness of the market. Usually, retail investors react to long bullish phases and, as such, tend to increase their transaction volumes at the same time. But during this last bullish rally, there was really no change in how much volume bitcoin retail investors were moving.

The chart shows a decline from around June, which coincides with when the market crash happened. However, since then, the downtrend has been consistent. So instead of increasing their transaction volumes as expected when the price was recovering, they continued to reduce their volume, falling below $10,000 on average.

The report points to this being an obvious weakness in the market because there was no volume or demand accompanying the shift in market sentiment. This is understandable given that sentiment can only drive the market for so long, and if supply continues to exceed demand significantly, then the price of the digital asset is bound to fall sooner rather than later.

The selling pressure on bitcoin has been on the rise in the last week. This is following the drop in price back to $21,000, causing panic in the markets. The crypto market sentiment has obviously taken a hit from the decline and has now fallen further into the fear territory on the Fear & Greed Index.

BTC settles firmly above $21,000 | Source: BTCUSD on TradingView.com

Indicators currently point to an 80% sell signal, and if BTC is unable to hold $21,000, then a decline below $20,000 is imminent. It is also important to note that the most prominent support level from here lies in the $20,711 territory. What this means is that the current trend is barely hanging by a thread. 

Glassnode also notes that investors across the market had leaned in favor of actually distributing their holdings at an above-market average cost basis level. This, coupled with the fact that there was no significant demand for the digital asset, led to the decline.

The market also shows no signs of having hit a bottom yet. So it is likely that $17,600 is not as low as the digital asset will go. Bitcoin, following historical trends, will likely hit around $12,000, at which point demand would rise. Coinciding with the next halving will trigger the start of the next bull run.

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