It’s been a rough month for Bitcoin bulls. While the price can still claim to be hovering around record highs, it’s fallen by well over 40% since its high in mid-December. With its market cap now below a third of the size it was just three months ago, plenty of Bitcoin bears have started to question its longevity. But with Bitcoin’s price so volatile, it’s hard to tell which factors are affecting its price. We’ve seen a recent spike in Bitcoin’s transaction fees, for example, but transaction volumes saw a dip in recent weeks as well. And there’s a new metric that might be even more telling: Bitcoin’s daily returns.
The cryptocurrency market has been through a rough year and it doesn’t seem to be getting any easier. Despite a rally in December, Bitcoin is down roughly 30% from the December high and is down over 70% from its all-time high. This week, the market has gotten even worse, with Bitcoin falling below $6,000 on Friday, and is now slowly rebounding back to a price above the $7,000 mark.
The Bitcoin market has been in a constant state of uncertainty for the past few months and it is continuously changing. With a short-term perspective, the market has recently been reacting to the bearish trend that has been going on for the past few months. By now, during the last month, Bitcoin has been going through a bearish trend, testing lifetime lows of $6000, which has continued through the launch of the SegWit2x upgrade.. Read more about bitcoin halving cycle chart 2021 and let us know what you think.
According to statistics provided by Glassnode, the magnitude of Bitcoin’s (BTC) current downward correction may not be as worrisome as it was in 2018.
According to the blockchain analytics company, investors who have kept Bitcoin for more than a year are less interested in selling their holdings than those who have held it for 3-6 months. Its statistics covers the period from April 14 to August 9 when Bitcoin fell from approximately $65,000 to roughly $44,000.
Bitcoin output age bands have been spent. Glassnode is the source of this information.
On the other side, all investment groups were responsible for the BTC price plummeting from $19,891 to $3,128 in 2018.
Glassnode data showed that a majority of “old coins” did not decide to lock in their 275 percent year-over-year gains even after a 35 percent downward correction, indicating significant “hodling behavior” that may help Bitcoin avoid a huge surrender scenario similar to that of 2018.
Glassnode made the following observation:
“Despite a strong rally to $45k, the Bitcoin market still has not seen a significant increase in old coins (>1y) being spent. This is very different to the 2018 bear market where old hands took exit liquidity on most relief rallies.”
Missing items are being sold in a panic
The primary reason of the 2018 bitcoin market collapse was exorbitant valuations fueled by the initial coin offering (ICO) craze. Random companies received billions of dollars to develop blockchain systems, but the vast majority of them ultimately proved to be vaporware or frauds.
The cryptocurrency market crashed from $700 billion in January 2018 to $102 billion in December 2018, when the bubble ultimately burst. As a consequence, Bitcoin, which was one of the most popular currencies for startup fundraising, dropped 85.27 percent from its previous high of $19,891.
Bitcoin’s performance after the crypto bubble broke in 2018. TradingView.com is the source for this information.
Nonetheless, the Bitcoin price surge of 2021 was fueled by sound macroeconomic fundamentals as investors sought safe havens from the world’s central banks’ loose monetary policies. As a result of central banks’ attempts to protect countries from the financial consequences of the coronavirus epidemic, worldwide debt reached $281 trillion last year.
Related: A $7 billion investment company advises using cryptocurrency to combat currency depreciation
This amounted to 355 percent of world gross domestic product (GDP). The Institute of International Finance predicts that borrowing will rise by another $10 trillion in 2021.
In 2020, global public debt will reach an all-time high. Institute of International Finance is the source of this information.
In a letter to investors, Anthony Pompliano, partner at Pomp Investments, said: “People have less wealth and more debt, and the depreciation of fiat currencies has made everything more costly around us.”
“Bitcoin promises to usher in a new age of sound money since the currency is outside the system and no one controls it. People will be able to save their way to financial independence once again, and the money will not lose value over time, but will instead grow in buying power.”
Return of short-term investors?
Bitcoin’s recent rally from below $30,000 to over $45,000 corresponded with a small increase in the proportion of investors who purchased the digital currency during the previous 3-6 months.
Heat map of Bitcoin unspent transaction output. Glassnode is the source of this information.
The cryptocurrency’s net unspent transaction output for 3M-6M investors was 12.84 percent on July 19, when Bitcoin was swaying around $30,000. On Aug. 9, that figure jumped to 13.44 percent. On the same day, Bitcoin was trading at $45,130, demonstrating that weak hands were becoming strong.
The author’s thoughts and opinions are entirely his or her own and do not necessarily represent those of Cointelegraph.com. Every investing and trading choice has risk, so do your homework before making a decision.
While the price of Bitcoin is currently under a lot of scrutiny, the digital currency is just beginning to enter its next bear cycle. That’s because unlike many of the cryptos that have recently hit record highs, Bitcoin is still a fundamentally sound investment. In fact, new data suggests that BTC isn’t entering its bear cycle until at least 2019, and perhaps even 2020.. Read more about crypto cycle 2021 and let us know what you think.
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