Bitcoin Holders Show Signs of Optimism Despite 30% Dip
- Bitcoin dropped to lows of $30,000 on Coinbase, dipping as low as $28,500 on some derivatives exchanges like BitMEX.
- Many lowe-cap coins crashed around 50% from daily opening due to large-scale liquidations.
- On-chain analysis suggests that long-term investors are bullish despite the crash.
Bitcoin’s 30% plunge yesterday echoed with the beginning of the 2018 bear market. Still, on-chain data indicates that long-term holders have strong hands.
Maximum Pain in Bitcoin Prices
Bitcoin dipped 30% yesterday as $800 billion in valuation was wiped out across the broader crypto market. According to TradingView, the total market capitalization of cryptocurrencies fell to lows of $1.2 trillion from an all-time high last week.
In the past, such downtrends have been seen only four times since Bitcoin’s top in 2017, with three of the four occasions leading to a prolonged bear market.
The first was on Dec. 24 when Bitcoin dropped drastically after touching a top of $19,600 five days earlier.
The asset dipped two months later then hit lows of $4,000 in Nov. 2018. On both occasions, the move kickstarted a bear trend.
Many other compelling arguments find relevance with the 2017 top. For instance, Bitcoin’s dominance over the cryptocurrency market is 44%, which is a similar level to when it topped out in late 2017.
Furthermore, the euphoria caused by the Coinbase direct listing seems co-incidental with CBoE futures debut in December 2017. In retrospect, the surge of so-called “dog tokens” like Shiba Inu was another palpable top sign. Nevertheless, following the “diamond hands” narrative in crypto, on-chain data suggests that old investors are still holding onto Bitcoin.
On-chain Analysis Highlights Faith in BTC
Before the top in Dec. 2017, the coin days destroyed (CDD) metric saw a significant spike in activity. The CDD metric tracks the time when Bitcoin was last moved in an address multiplied with the value transferred. Older addresses and large BTC transactions cause a spike in CDD.
While there was a considerable sell-off in Q3 of 2020, the CDD in the last two months has been 50% less than the months before the negative trend in 2017. This suggests that long-term investors have not moved their assets in recent months.
Moreover, a closer look at the movement in the last two days points to the “buy-the-dip” action by whales. Crypto analytics firm Chainalysis noted that “Bitcoin inflows into exchanges are relatively low compared to past sell-offs.” Inflows are an indicator of fear in the market following a large drop. Low inflows indicate optimism among holders.
The firm also found that whales—classified as holders with more than 1,000 BTC—added 34,000 Bitcoin to their addresses on Tuesday and Wednesday, having sold 51,000 the previous week.
The wipe-out of the futures market, which saw a huge $8.6 billion in liquidations, is a positive sign for more upside in crypto prices. This is because a highly leveraged market is far riskier, and prices tend to deviate from organic growth. Ulrik K. Lykke, Executive Director at crypto hedge fund ARK36 said:
“In terms of Bitcoin’s outlook, things may be looking grim right now, but historically this is just yet another hurdle for Bitcoin to overcome and a small one compared to what it has braved in the past.”
Lykke added the performance is consistent as “in 2017, price dives in the range of 35%+ happened several times before the price topped out.” Bitcoin dropped over 30% from local tops multiple times during the last run-up in 2017.
The evolution of DeFi on Ethereum in promoting financial use cases like borrowing and trading and the new-found institutional interest has strengthened the market. Nevertheless, prices could be volatile over the coming weeks as less credible projects are weeded out from the market.
The information on or accessed through this website is obtained from independent sources we believe to be accurate and reliable, but Decentral Media, Inc. makes no representation or warranty as to the timeliness, completeness, or accuracy of any information on or accessed through this website. Decentral Media, Inc. is not an investment advisor. We do not give personalized investment advice or other financial advice. The information on this website is subject to change without notice. Some or all of the information on this website may become outdated, or it may be or become incomplete or inaccurate. We may, but are not obligated to, update any outdated, incomplete, or inaccurate information.
You should never make an investment decision on an ICO, IEO, or other investment based on the information on this website, and you should never interpret or otherwise rely on any of the information on this website as investment advice. We strongly recommend that you consult a licensed investment advisor or other qualified financial professional if you are seeking investment advice on an ICO, IEO, or other investment. We do not accept compensation in any form for analyzing or reporting on any ICO, IEO, cryptocurrency, currency, tokenized sales, securities, or commodities.
See full terms and conditions.
Source: Read Full Article