The price of Bitcoin spiked by over 3.5% in the early days of Thursday, May 14th, following the advancement of the CLARITY Act by the US Senate Banking Committee. However, the flagship cryptocurrency soon reversed towards the downside, thereby raising more questions concerning what is happening within the market. Recent on-chain analysis has surfaced, diving into the factors that might drive Bitcoin in the near and long terms.
Sentiment Turns Extremely Bullish Following Senate Committee Vote
In a May 15th post on the social media platform X, on-chain analytics firm Santiment Intelligence reported a sharp rise in Bitcoin’s crowd sentiment. According to the chart shared by the market analytics firm, the crowd has reached one of the greediest levels towards Bitcoin this year.
This notable spike in the emotions of Bitcoin’s market participants apparently followed news of the CLARITY Act’s advancement (in a 15–9 Bipartisan vote). For context, the CLARITY Act is a proposed US crypto regulation bill designed to create clearer legal and regulatory rules for the digital assets industry.
As Santiment Intelligence explained, the CLARITY Act’s progress should be seen as long-term bullish news for Bitcoin. This is because clearer rules create greater certainty among investors, which in turn increases their inclination to participate in the crypto market.
Source: @SantimentData on X
However, this development could signal bearish pressure on Bitcoin in the near term. This is due to the excessive euphoria caused by the aforementioned news.
As the analytics platform stated, “historically, when we see 1.55 bullish comments for every 1.00 bearish comment toward cryptocurrency’s top market cap, we advise caution.” This is because markets typically move in the opposite direction of the frenzied expectations of their crowds.
Bitcoin Miners Sell $64 Million BTC In 96 Hours
In a separate May 16 post on X, popular market analyst Ali Martinez reported a noticeable decline in Bitcoin miner reserves over the past four days, suggesting miners have been increasingly transferring their holdings for potential sale.
The activity of this class of market participants is important for BTC’s supply dynamics, as they generate new BTC through block rewards, which they then sell periodically to cover minor operational costs. These are unlike the mostly inactive long-term holders.
Martinez highlighted in his post that miners have sold about 800 BTC in the past 96 hours. While this is not a large amount, sudden spikes in miner selling could influence short-term market sentiment, ultimately causing a bearish injection.
Elevated miner outflows have historically preceded periods of short-term price weakness or consolidation phases. Coupled with the expected effect of a market-wide euphoria, it is apparent that Bitcoin’s price might undergo some corrective movement in the near term.
As of press time, Bitcoin is trading at $79,136, down 2.9% over the past 24 hours, according to CoinGecko data.
The price of BTC on the daily timeframe | Source: BTCUSDT chart on TradingView
Featured image from iStock, chart from TradingView
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