NEW YORK, March 2025 – Compass Point Research & Trading has issued a significant market advisory, urging cryptocurrency investors to exercise substantial caution when considering Bitcoin dip-buying strategies until the digital asset decisively reclaims the psychologically critical $98,000 threshold. This recommendation emerges from the firm’s latest analysis of on-chain data and investor behavior patterns, specifically highlighting the average acquisition cost for short-term holders as a pivotal sentiment indicator. The advisory follows Bitcoin’s recent rejection at approximately $97,500, which triggered a subsequent decline below the $90,000 support level, underscoring the persistent volatility and risk inherent in current market conditions.
Bitcoin Price Prediction: The $98,000 Psychological Barrier
Compass Point’s analysis identifies the $98,000 price point not merely as a technical resistance level but as a fundamental psychological benchmark rooted in investor cost basis. According to data referenced from blockchain analytics platforms, this figure represents the average purchase price for Bitcoin acquired by short-term holders—typically defined as addresses holding coins for less than 155 days. These market participants demonstrate heightened sensitivity to price fluctuations compared to long-term holders, often acting as a source of selling pressure during downturns or profit-taking near their break-even point. Consequently, the firm argues that until Bitcoin sustains trading above this aggregate cost basis, the risk of accelerated sell-offs from this cohort remains elevated, potentially negating the benefits of premature dip-buying.
Furthermore, the investment bank contextualizes this level within recent market action. Bitcoin’s ascent to $97,500 in early March 2025 represented its highest valuation in the current cycle, yet it failed to achieve a weekly close above the identified resistance. This failure precipitated a correction that saw prices retreat by over 7%, breaching the $90,000 support. Such price action exemplifies the technical significance of the $98,000 zone. Market technicians often observe that former resistance, once broken, can become support; however, the inverse is also true. A key level that acts as resistance after a rally often requires multiple tests and significant volume to overcome. Compass Point’s caution stems from this interplay between on-chain economics and technical chart structure.
Analyzing Short-Term Holder Sentiment and Market Impact
The firm’s focus on short-term holder (STH) cost basis derives from established behavioral finance principles. STHs, frequently comprising newer investors and tactical traders, exhibit different behavioral patterns than their long-term counterparts. Their average cost basis serves as a collective psychological anchor. When the market price dips below this anchor, fear and loss aversion can trigger reactive selling to minimize losses, creating a self-reinforcing downward spiral. Conversely, when the price rallies above it, confidence grows, potentially fueling further buying. Compass Point’s warning suggests the market has not yet established sufficient momentum to push and hold above this collective breakeven, leaving it vulnerable to sentiment-driven sell-offs.
The Leverage Risk Factor in Current Market Conditions
Integral to the advisory is Compass Point’s explicit warning regarding the persistent risks associated with leveraged trading. The cryptocurrency market, particularly on centralized and decentralized exchanges, continues to support high levels of leverage, sometimes exceeding 50x on certain perpetual futures contracts. During periods of volatility near critical technical levels like $98,000, leveraged positions become exceptionally fragile. A swift price rejection can trigger cascading liquidations, exacerbating price moves and creating violent, whipsaw action that can quickly erase capital from over-leveraged dip-buyers. The bank notes that while a deeper correction toward the $80,000 region might present a more structurally sound buying opportunity with a clearer risk-reward profile, entering leveraged positions in the current environment carries disproportionate risk.
To illustrate the dynamics between price, holder cohorts, and market stability, consider the following comparative framework:
| Metric | Short-Term Holders (STH) | Long-Term Holders (LTH) | Market Implication |
|---|---|---|---|
| Average Cost Basis | ~$98,000 (Current Resistance) | Significantly Lower | STH selling pressure increases below $98K |
| Behavioral Driver | Profit/Loss Sensitivity, Momentum | Conviction, Macro Outlook | STH actions amplify volatility; LTH provide stability |
| Reaction to $97.5K Rejection | Likely to sell or reduce exposure | Likely to hold or accumulate slowly | Creates net selling pressure on failed breakout |
| Risk from Leverage | High (Often use leverage for trading) | Low (Typically unleveraged holding) | Leveraged STH liquidations can crash price |
This analysis is supported by historical precedent. Previous market cycles have shown that sustained breaks above the aggregate cost basis of recent buyers often precede more stable, parabolic rally phases. Until that condition is met, the market remains in a consolidation or distribution phase where rallies are prone to failure. Compass Point’s research team, led by analysts with backgrounds in traditional finance and crypto-economics, emphasizes a data-driven approach. They cross-reference on-chain metrics from sources like Glassnode with order book liquidity data from major exchanges to form a holistic view of supply and demand dynamics.
Broader Market Context and Institutional Perspective
The advisory from Compass Point arrives during a period of significant institutional maturation within the cryptocurrency sector. The approval and subsequent inflows into U.S. spot Bitcoin ETFs in 2024 created a new class of institutional demand, altering traditional market dynamics. However, these vehicles primarily influence spot market buying pressure. The derivatives market, where leverage is prevalent, still operates with high volatility. Compass Point’s caution serves as a reminder that despite institutional adoption, core market mechanics—like the psychological impact of holder cost basis—remain powerfully relevant. Other firms, including Fidelity and Galaxy Digital, have published research noting similar patterns, though their specific price targets and timing may differ.
Key factors currently influencing the Bitcoin market landscape include:
- Macroeconomic Conditions: Interest rate decisions by the Federal Reserve and other central banks continue to impact liquidity and risk appetite across all asset classes, including crypto.
- Regulatory Developments: Clearer regulatory frameworks in major economies are reducing systemic uncertainty but also imposing new compliance costs.
- Technological Advancements: Ongoing upgrades to the Bitcoin network and scaling solutions affect its utility and long-term value proposition.
- Geopolitical Factors: Currency devaluation risks and capital flight in certain regions continue to drive asymmetric demand for Bitcoin as a non-sovereign asset.
In this complex environment, single-factor analysis is insufficient. Compass Point integrates the $98,000 STH cost basis into a multi-variable model that also considers macro liquidity, ETF flows, and mining economics. Their resultant “caution” stance is not a bearish prediction but a risk-management recommendation. It advises investors to wait for a clearer signal of strength—a confirmed breakout with volume—before committing additional capital to dip-buying strategies, especially those employing leverage.
Conclusion
Compass Point’s analysis presents a nuanced Bitcoin price prediction centered on behavioral economics and market structure. The firm’s advisory to avoid aggressive dip-buying until Bitcoin reclaims and sustains the $98,000 level is grounded in the observable behavior of short-term holders and the amplified risks present in a leveraged market. This threshold represents more than a number on a chart; it is the aggregate breakeven point for a significant and emotionally sensitive cohort of investors. While deeper corrections may present future opportunities, the current recommendation prioritizes capital preservation and awaits a stronger confirmation of bullish momentum. For investors navigating the 2025 cryptocurrency landscape, understanding these dynamics—the interplay between holder psychology, leverage, and technical levels—is crucial for formulating robust, risk-aware investment strategies.
FAQs
Q1: What exactly does the $98,000 level represent according to Compass Point?
The $98,000 level represents the average purchase price, or aggregate cost basis, for Bitcoin acquired by short-term holders (those holding for less than approximately five months). Compass Point identifies this as a critical psychological level because prices below it may trigger selling from this group to avoid losses.
Q2: Why is the behavior of short-term holders so important for Bitcoin’s price?
Short-term holders are typically more reactive to price movements than long-term holders. Their collective actions, especially selling near their average cost basis, can create significant supply-side pressure that halts rallies or accelerates declines, making their psychology a key short-to-medium-term market driver.
Q3: Does Compass Point believe Bitcoin will fall to $80,000?
The firm does not make a definitive prediction for a drop to $80,000. Instead, it notes that such a correction would present a potentially stronger buying opportunity from a risk-reward perspective, but its primary advice is to wait for a confirmed breakout above $98,000 before engaging in aggressive dip-buying.
Q4: How does leveraged trading increase risk near the $98,000 level?
High leverage magnifies both gains and losses. If the price is rejected at resistance (like $98,000), a swift move downward can trigger automatic liquidations of leveraged long positions. This selling from liquidations can cascade, causing a sharper and faster decline than would occur in an unleveraged market.
Q5: Is this analysis only relevant for traders, or also for long-term investors?
While the advice is particularly crucial for traders employing timing-based or leveraged strategies, long-term investors can also benefit from the insight. Understanding these market mechanics can help them make more informed decisions about dollar-cost averaging entry points or allocating capital during periods of high volatility.
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