The crypto bloodbath has wiped away billions of dollars from the global crypto market in the past month. The failure of crypto institutions has led to liquidity across major cryptocurrencies leading to price drops. This is evidently one of the more uncertain times in crypto history.
At the heart of it lies the king coin, Bitcoin. At press time, the flagship coin was sitting below a historic support line of $20,000 and was struggling to make a sustained bullish run. It was down by 8.25% by the day and a further 32.5% in the past week.
The overall Bitcoin domination of the crypto market has also dropped to a meager 43%. The state of Bitcoin has also vastly affected the entire sentiment around the crypto market.
Here’s the catch
Never mind the faltering state of Bitcoin, there are a few prominent figures who still believe a rally is on the cards. Galaxy Digital CEO Mike Novogratz has given a very optimistic message to the entire crypto community. He believes that the current market conditions are holding back Bitcoin, but it will recover eventually.
“I 100% think there are people on the sidelines waiting to build, but I think the first buyers actually from the traditional sense are going to be big global macro hedge funds. The moment the Fed flinches, I think you’ll see lots of traditional macro funds, who’ve had a great year, buy Bitcoin. We’ll add to our position at that point.”
On the other hand, in an interview with Bloomberg, Nexo’s co-founder Antoni Trenchev repeated his “$100k” stance on Bitcoin. He used the instance from 2020 when Bitcoin faced severe bearish winds but managed to recover in a rampant bullish streak.
“The last time we had this type of volatility in Bitcoin and it lost like 50% intraday, it was in March 2020. Out of those levels, it went up 10x and reached levels of $50,000. So after the deleveraging and de-risking of the sector, I think we’ll be back in a rampant bull market. There is a very good chance we see a relief rally here, but it also depends on how the overall risk-on assets are performing. You can’t have the S&P500 go down 3% a day and expect a heavy rally in Bitcoin.”
Can Bitcoin even cross its ATH again?
Trenchev’s calls for “Bitcoin $100k” look very far-fetched in these times of financial turmoil. The Bitcoin metrics also are suggestive of a certain price drop for an extended period. The current $20k line will be difficult to hold under regulatory pressure and tightening monetary conditions. Major Bitcoin metrics are pointing towards more investors’ pain as the crypto winter wears on.
The exchange outflow is one indicator that is hinting at a section of investors who are buying the dip relentlessly. The metric just reached its highest point at $86,217,539 since the Terra crash.
The second metric here is the MVRV Z score which just reached a 2-year low of -0.226. Moreover, the previous low was just three days ago at -0.201. This is showing how undervalued Bitcoin is right now; an area that is usually marked by bottoms or mass accumulation.
Bitcoin: On-chain metrics to consider in this bear cycle before going…
The crypto market has had quite a ride this month after bearish waves struck down major cryptocurrencies. The global crypto market capitalization also fell below $1 trillion leading to failing crypto institutions such as 3AC and Celsius. Bitcoin also suffered heavy drawbacks during the period.
BTC reached its lowest levels since December 2020 after dropping below $17,750. Starting the month at around $32,200, the largest-sized crypto has taken a lot of heat and at press time, it was trading at $21,000. The king coin was up by more than 2% in the past day and was just down 0.05% during the week. This was a good signal of recovery after treading through bearish downturns early in June.
Nearing market bottom
On-chain data analytics platform CryptoQuant released the latest update surrounding Bitcoin. It stated that the current BTC price is undervalued. Most on-chain indicators indicate that we are close to a market bottom for Bitcoin.
BTC’s indicator of Net Unrealized Profit/Loss was hovering around -0.06, at press time. This is the initial signal for nearing a market bottom. In the latest crypto crash, there were many addresses that recorded losses when BTC reached the 18-month bottom of $17,744.
According to CryptoQuant, the MVRV ratio has fallen significantly during the current run. At press time, it was estimated at around 0.93, suggesting an undervaluation of BTC.
There was, however, a little spike in Miner’s Position Index but it was still estimated at -0.6. This means that miners are circulating more than their daily distribution in the moving average of the YTD.
Miners have also increasingly offloaded their holdings to exchanges. This can indicate that some miners’ revenue cannot meet the break-even point.
For many investors, this is a good time to start accumulating again if they want to recoup their losses. With the regulatory proposal for digital assets already in place in the United States, there is still hope for a bullish surge in the coming months.
Bitcoin [BTC]: Assessing how deep are we into the bear market
Bitcoin, the largest cryptocurrency has had its fair share of bear markets experiences in the past. But, after every bear cycle, the king coin has managed to recover successfully. Now, the question is- Can BTC repeat the same this time around?
Highlighting the norms
Bitcoin, at press time, circulated in the $20k to $21k range after suffering massive sell-offs. Some harsh liquidation scenarios even recorded figures in billions. These conditions have directly impacted BTC’s price as it led to more drawdowns.
The Bitcoin drawdown from ATH has reached 73.3%, compared to previous bear market lows of between 75% and 84% in the graph. But, as past bore the witness, BTC has reclaimed a top spot every time after witnessing a bearish run.
According to Glassnode, past all-time high (ATH) duration stood at 435 days from the Apr-2021 ATH and 227 days from the Nov-2021 ATH. This firmly placed the current bear within historical bear norms.
That being said, the divergence between BTC’s address activity and price marked the most optimistic level since December 2020. Consider this- the number of unique addresses interacting on the network didn’t fall as much as it may seem after a 70% price retracement since November.
The divergence between active addresses and price was last this high in December 2020. Thus, indicating that a price increase is possible. In addition, Bitcoin recorded significant whale transactions as well. It merely indicates that the major stakeholders might be keen on the token despite the FUD and inflation.
Whalin’ with caution
Furthermore, the largest Bitcoin holders on the blockchain added 16% more coins to their holdings over the last 30 days. At press time, the entity possessed over 776,000 BTC worth over $16 billion.
This, indeed, could inject some optimism during such uncertain times. Following this development, number of addresses holding 0.1+ BTC saw an uptick as well. The metric on Glassnode reached an ATH of 3,615,634.
Bitcoin Whale Presence On Derivatives Still High, More Volatility Ahead?
On-chain data shows Bitcoin whales are transferring large amounts to derivatives exchanges right now, a signal that more volatility could be ahead for the crypto.
Bitcoin All Exchanges To Derivatives Flow Continues To Show High Value
As explained by an analyst in a CryptoQuant post, BTC whale activity on derivatives exchanges still seems to be high.
The relevant indicator here is the “all exchanges to derivatives exchanges flow,” which measures the total amount of Bitcoin moving from spot exchange wallets to derivatives.
When the value of this metric spikes up, it means whales are currently moving a large number of coins to derivatives exchanges right now.
Such a trend usually occurs around lows in the price of the crypto as whales look to get themselves long positions.
Related Reading | Bitcoin Recovery Slows Down As Whale Inflows Remain Elevated
On the other hand, low values of the indicator show whales aren’t moving much coins to derivatives at the moment. This kind of trend has historically lead to tops in the value of the coin.
Now, here is a chart that shows the trend in the Bitcoin all exchanges to derivatives flow over the last couple of years:
Looks like the value of the metric has been quite high recently | Source: CryptoQuant
As you can see in the above graph, the Bitcoin spot to derivatives flow has spiked up recently, suggesting that whale activity is pretty high right now.
In fact, the current value of the indicator is actually the highest ever in the history of the cryptocurrency, implying there is an all-time high rate of whales on derivatives currently.
Historically, the price of the crypto has observed significant volatility whenever the metric’s value has been elevated.
Based on this trend, the quant believes that the value of the coin could still see further fluctuations in the near future.
The analyst also notes that a reduction in the all exchanges to derivatives flow will need to be there, for the volatility to die down.
At the time of writing, Bitcoin’s price floats around $21.1k, up 4% in the last seven days. Over the past month, the crypto has lost 27% in value.
The below chart shows the trend in the price of the coin over the last five days.
The value of the crypto seems to have surged up over the last couple of days | Source: BTCUSD on TradingView
After hitting a low of below $18k a week ago, Bitcoin has been trying to recover. So far, the crypto has managed to break above $21k again, but it’s yet unclear whether this recovery will last.
Featured image from Unsplash.com, charts from TradingView.com, CryptoQuant.com
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