Bitcoin price drops amid capitulation fears – Is a BTC bear trap forming?

Rising Bitcoin [BTC] unrealized profits have raised FUD around a potential capitulation.

From a technical lens, this doesn’t seem too far-fetched. Bitcoin fell over 4% this week, after a three-week rally that sent BTC from $75k to $87k, putting early buyers in profit, as highlighted in a CryptoQuant report.

According to the report, the critical level, in this case, has been identified at $74.6k, which is Bitcoin’s Short-Term Holder Realized Price. Holding above this level would keep the early bull-market structure intact. So, BTC is still in a profit zone, but some holders are starting to take profits with short-term holders sending 45.6k BTC to exchanges in just 24 hours.

However, that’s not the entire story.

Since the 6th of October, U.S. government Bitcoin holdings have reportedly fallen by 17,468 BTC, leaving a balance of 174,481 BTC. Altogether, rising profit-taking and the drop in government BTC holdings have coincided with Bitcoin’s 4% pullback, adding to selling pressure, and fears of further downside.

Usually, profit-taking in a bull market is a positive sign. However, the key detail from CryptoQuant’s data changes the nature of the reading. Of the 45.6k BTC transferred to exchanges by short-term holders, 29.1k BTC are transferred at a loss.