According to on-chain analyst Willy Woo, Bitcoin (BTC) could face a final bear market capitulation if ‘whales’ (addresses holding more than $1M in Bitcoin) increase selling pressures. But more inexperienced investors choose to become long-term Bitcoin holders, limiting the risks on the sell side to less than $30,000. We have prepared Bitcoin master’s comments and analysis for Cryptokoin.com readers.
Is there room for another Bitcoin drop?
Willy Woo evaluates the average price at which short-term investors have entered the Bitcoin market throughout history and plots the daily change in value. This results in a cost basis that signals when ‘inexperienced’ traders sell BTC to ‘experienced’ traders during a BTC freefall that often coincides with the market bottom.
The cost floor has experienced significant declines in the previous bear markets, also before strong accumulation took place as shown in the chart below. Interestingly, Bitcoin’s continued correction (from $69,000 in November 2021 to around $39,000 in March 2022) has not resulted in a major drop on a cost basis.
Bitcoin short-term owner cost basis change / Source: Willy Woo “It is not certain whether we have capitulated yet,” the analyst says, adding, based on the cost-based signal, “no room for another drop” It is,” he adds.
“Bitcoin could drop to $30,000 due to deteriorating macro environment”
Willy Woo’s outlook comes in line with growing speculation about Bitcoin’s next big drop. For example, Acheron Insights editor Christopher Yates says the price of BTC could drop to $30,000 due to the ‘deteriorating macro environment’. “What worries me more and more that the bottom is yet to come in 2022 is that we have yet to see a capitulation-style escalation occurring in all the recent lows in late 2019, early 2020 and mid-2022,” said
. Christopher Yates adds in his recent BTC analysis:
While not a prerequisite for a market bottom, such a capitulation-like increase in volume helps give us confidence as to when such a bottom might be imminent.
In its latest weekly report, data source Ecoinometrics provides evidence of the demand gap between small and wealthy Bitcoin investors. For example, he records that addresses holding up to 10 BTC have accumulated cryptocurrencies in the past 30 days.
On-chain Bitcoin accumulation and distribution / Source: Ecoinometrics “If they break tightening cycles, all risk assets will collapse”
Willy Woo also states that Bitcoin whales are selling their stashes and thus continuing the downward pressure on the price. This means that small investors have absorbed the sell-side pressure and have so far prevented the BTC price from falling below $30,000.
In addition, Ecoinometrics analyst Nick states that the continued accumulation trend is ‘as stagnant as can be’, adding that it may weaken further after the Federal Reserve’s expected rate hike in March to rein in rising inflation. The analyst makes the following statement:
To summarize, the Fed is in control. If they break tightening cycles, all risk assets will collapse. Bitcoin is currently trading as a risk asset, so it is unlikely to be an exception.
Ecoinometrics and Willy Woo’s analysis also shows that inexperienced traders do not abandon their cryptocurrencies and in the process become long-term holders (LTH).
Bitcoin is the ‘most deflationary’ in history
Meanwhile, according to ARK Invest on-chain analyst David Puell, another measurement called the ‘LTH Inflation/Deflation ratio’ also supports the aforementioned theory. supports. In detail, Bitcoin inflation points to LTH putting their BTC into circulation faster than the natural selling direction of miners. Conversely, deflation shows that LTHs are absorbing a proportional amount of the miner sell side each day alongside the extraordinary total supply.
The attached chart below shows the LTH Inflation/Deflation ratio with inflationary results flashing red and deflationary data green.
Bitcoin LTH market inflation/deflation rate / Source: ARK, Glassnode on-chain researcher at ARK Invest, David Puell, “Our analysis is long-term holders (LTH) It shows that Bitcoin is in the most deflationary period in history, which is proportional to the supply held by the company.”
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