The latest analysis by Glassnode suggests that the worst of the
sell-offs could be concluded, but the market still needs time to
recover.
“Extreme” demand at the $20,000 price point for Bitcoin (BTC)
appears to have forced the coins back into the hands of investors who
care less about price while creating a new realized price level.
In the latest The Week OnChain Newsletter
published on July 25, Glassnode’s UkuriaOC pointed to “extreme demand”
around the $20,000 region, noting that at each psychological price level
from $40,000 to $30,000 to $20,000 creates a new group of short-term
holders (STHs).
The Glassode analyst noted that much of the supply
that new STHs bought during that drawdown has not been sold even though
prices are significantly down. This may be due to less price sensitive
buyers, or those who care more about Bitcoin fundamentals than
investment gains, driving demand.
Between late April through June, BTC price has fallen 55% from $40,000 to a low of about $18,100 according to CoinGecko.
Glassnode
wrote that this suggests the newly-minted STHs are price insensitive
buyers with more confidence in Bitcoin, adding that their conversion
from a STH to a long-term holder (LTH) who does not sell for at least
155 days would help confirm this.
“It would be
constructive to see these STH held coins at the $40k-$50K level start to
mature to LTH status over coming weeks, helping to bolster this
argument.”
In this current bear market, confirmed LTHs
have locked in nearly 400 days straight of yearly profitability
performing better than 30-day profitability.
This is nearly the
same duration that LTHs experienced during the 2018 bear market.
Glassnode wrote that this suggests losses are being locked in by LTHs
which, if the previous argument holds, means the new buyers have less
price sensitivity than the cohort who sold, meaning they could become
the newest group of LTHs.
Another
point of note in the report is that “unprecedented forced selling” from
crypto companies amid mass liquidations and bankruptcies created
conditions ripe for a relief pump.
Related: The battle between crypto bulls and bears shows hope for the future
The
report concludes by stating that while the “worst of the capitulation
may be over,” BTC could remain in this low range for some time as the
cost basis for new coin buyers has diverged below the realized price for
only about 17 days straight. Previous bear cycles have endured low
divergences between 248 and 575 days.
BTC has retreated 3.1% over the past 24 hours to trade at $21,146 at the time of writing.
source link : https://cointelegraph.com/news/extreme-demand-for-btc-at-20k-creating-new-support-levels-glassnode
