Bitcoin (BTC) Holding Data Suggest Recovery Possible
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Bitcoin (BTC) broke down below $50,000 on short-term shocks. Trader sentiment switched to “fear” from “greed” just days ago. But there may be underlying factors that suggest long-term bullishness.
BTC recovered to $49,716.19 at close on Thursday, with a boost from US trading. The price dipped to a daily low of $46,980.02, taking down most of the altcoins with few exceptions. The BTC market cap dominance is now down to 41%, from nearly 70% at the start of 2021.
The recent slide arrives at a time when BTC has closed over $50,000 since February 17, with few exceptions. Now, BTC has a two-day streak of closing in the $49,000 range. The $60,000 level shows signs of selling from bigger wallets to realize some of the profits.
Long-Term Holding Does Not Budge
After the recent slide, data still show that long-term accumulation continues. This is partially due to corporate purchases, as MicroStrategy bought another tranche of BTC, but also due to retail. BTC is still bought up and taken off crypto exchanges, despite the short-term fluctuations.
According to data, 58% of the BTC circulating supply is held for the long term. A part of the holders are the miners, who now only need to sell a fraction of their reward to cover the costs.
Holding behavior is also indicated by another recent significant exchange withdrawal. This adds to the more than 2.12M BTC locked away for more than a decade since their last move.
Mining Picks Up Again
Despite criticism about BTC mining and its environmental impact, May is a strong month for mining using hydroelectric power. The rainy season boosts available energy. At the current prices, miners become more competitive, both in terms of energy use and new machines with more powerful hashrates.
The recent difficulty readjustment made the network more than 21% more competitive, and is the biggest upward adjustment in the past seven years.
Difficulty is a lagging indicator of miners joining the network, as it readjusts every two weeks. Earlier this year, BTC mining slid unexpectedly on probable power outages for some of the big mining farms.
Shift from Whales to Satoshi Stackers?
While BTC withdrawals continue, there are some indicators “whales” may sell some of their holdings.
There were signs of significant liquidation after the recent Elon Musk tweet on the BTC electricity usage. But there are also indicators buying continues.
Beyond some of the early adopters and big holders, addresses with 10,000 BTC keep mopping up coins from the market.
The recent price slide shows some selling of significant “whale” orders, which were eaten up by the market. The recent events also suggest BTC has not achieved a market top and may choose another direction in the longer term.
At the moment, the biggest market dilemma remains whether the market has already seen its top, or if it could continue sideways and attempt another all-time high. Long-term models allow for fluctuations, while seeing the price rise over the years based on scarcity.
Tether Influence Diminishes
Tether (USDT) has shifted its trading profile in the past months. Previously, USDT covered more than 97% of all crypto trades, as it was used in multiple pairings. Even now, USDT has above 57B tokens in circulation, and carries more than $200B in crypto trades per day.
But data show USDT is now stepping back, with more dollar-pegged coins taking over some of the pairings. Binance USD, the native stablecoin of the Binance Exchange, now carries more than 5% of crypto trades.
BUSD is also the only stablecoin beside USDT to have a daily turnover exceeding its supply. BUSD is both a counterpart for BTC trading, and for various uses in altcoin pairs and DeFi liquidity pools.
The influence of stablecoins is more predictable in 2021. In the past, USDT had a supply of a few billion tokens, and its printing could be traced to BTC price moves. The market in 2021 is more complex, and there is more incentive to hold onto the assets. The addition of more stablecoins boosts the available liquidity for BTC, possibly avoiding the worst price drops as volumes dry out.
Altcoins Remain Strong
Altcoins are also showing significant signs of strength that are independent of talks about a market top. ETH is one of the large caps going through a transformation, as the supply for spot trading diminishes.
The shift to passive income means less pressure to sell off ETH. The tokens themselves become more valuable to be held for staking or the upcoming ETH 2.0 network. Passive returns are available for ETH in the form of providing liquidity for decentralized trading pairs.
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