Underwater, ATH buyers have capitulated according to Glassnode

At the gate – The markets operate in cycles and successive waves, bullish then bearish. The Data Specialist on chain Glassnode shows how red the last few months have been on the markets. His latest report notably points to the fact that buyers entering Bitcoin at $69,000 are starting to give up. A little reminder about the difficulty of the crypto market and its volatility.

>> Build your portfolio with crypto opportunities on KuCoin (affiliate link). <<

Bitcoin, after the rain the good weather?

The volatility and financial opportunities offered by cryptos are enough to make your head spin. After hitting a new high last November, Bitcoin and other cryptocurrencies have been in a sharp correction ever since. A sharp retracement, up to 50% from $69,000 for Bitcoin, up to -80% for top 100 altcoins.

The most recent report on chain from Glassnode explores the transactions that have taken place on the Bitcoin blockchain since last November. Among the various metrics used: net realized profits and losses.

Net realized profits and losses on bitcoin since March 2021. Source: Glassnode

On the chart above, the green peaks represent profit selling while the red peaks show loss selling. On the sequence studied, two large “capitulation” peaks can be observed around $30,000. The price then rose again in July before hitting a new high in November.

Two large peaks of panic sell after a 50% retracement… that’s probably what’s shaping up even though we’re a long way from last year’s sell-off records. Indeed, the graph shows a similarity between the movements from May to July and from November to March, with a lesser amplitude. The biggest peak of 2022 weighs for less than $3 billion in losses, a threshold largely exceeded in 2021.

Even if the amplitude would have been identical, this cannot guarantee a meteoric rise as happened from July 21, 2021. This postulate should be kept in mind as soon as you walk through the door of the technical analysis, whether chartist or on chain. It is all the more so with the current macro-economic context, which is more than uncertain.

BTC HODLers more serene than ever

Token distribution chart by price levels.
The URPD shows the distribution of tokens by price level. URPD of May 10, 2021. Source: Glassnode

The histogram above represents the amount of bitcoins last moved and the price level at which they were moved. In principle, “illiquid” tokens, ie withdrawn from exchanges or which have not moved for several months, are considered to be held by players with a medium-term vision.

Starting from the depths of the covid 2020 crash going all the way to the peak of Bitcoin in May 2021, the crypto queen had recorded a rally of around 1470%. In just a year and a half. This meteoric rise was made possible by the arrival of institutional investors like Tesla and by classic “FOMO” (fear of literally missing out). But when the individual is subject to FOMO following Elon Musk’s announcement, for example, the boss of Tesla may already be reselling the tokens he bought upstream. While the individual sees the market go up irrationally, and also wants to get on the train.

Any good trader repeats it over and over again: you don’t buy a vertical market. Still, token volumes moved between $54,000 and $60,000 show that plenty of participants have been active in this price zone. However, the market never wins the majority of participants and had a great interest in purging a dizzying, unhealthy rise.

>> Build your portfolio with crypto opportunities on KuCoin (affiliate link). <<

What matters is not the fall, it’s the learning

The URPD shows the distribution of tokens by price level.  URPD of February 27, 2022. Source: Glassnode
The URPD shows the distribution of tokens by price level. URPD of February 27, 2022. Source: Glassnode

This same indicator observed in February 2022 is quite eloquent. Indeed, due to the simple fact that the market spent several months between $30,000 and $65,000, Bitcoin traded at these price levels for a long time. There was therefore volume operated between the two identified price limits. Mechanically, many traders who entered beyond $65,000 exited the train a few thousand dollars lower, in losses. However, mentalities seem to be changing among small carriers.

Regarding the 2022 crypto promotion, the data on chain also report that the newbies (new entrants) bought the dip (fold). The lines move. The crypto market will become mature only its players will mostly become so. It is individuals who make the market, which is why the psychological aspect is crucial when dealing with this discipline.

Indeed, the arrival of the institutionals, the record price of $69,000 (in addition to the fundamentals of Bitcoin which have never been stronger), all contribute to the gain in confidence surrounding BTC. Indeed, the arrival of the Lightning Network, the emergence of crypto-nations add to the intrinsic value of Bitcoin. And this, despite the gloomy macroeconomic context, which has become moribund since the Russian invasion and the first economic sanctions.

According to IntoTheBlock, retail investors own more bitcoins than ever before. The number of wallets holding between 0.1 and 1 BTC is at an all-time high. Indeed, more than 780,000 Bitcoin addresses are present in this slice. IntoTheBlock also reports that this cohort was the fastest growing during the month of February.

Ultimately, the bearish move seems to be coming to an end if the data is to be believed on chain. But Bitcoin and the crypto market as a whole are still strongly correlated to the stock market. Cryptos are seen as a so-called asset class risk-on. However, Bitcoin’s fundamentals seem a little stronger every day and even the most modest players seem to be positioning themselves more and more for the long term. Which sweeps away immediate speculation and further strengthens Bitcoin’s solid foundation.

Beyond the purchase, it is possible to mine cryptocurrencies to generate passive income. Solo miner? Join KuCoin Pool to enjoy guaranteed income through the FPPS distribution mode. In addition, mining costs are low. register now and connect your Antminers to the KuCoin network (affiliate link).

Leave a Reply

Your email address will not be published.