KEYTAKEAWAYS
- New investors who entered the market with Bitcoin spot ETFs are selling at a loss, while long-term holders remain unfazed.
- Bitcoin's price, despite recent drops, has shown more stability compared to previous bull market cycles.
- Analysts suggest Bitcoin's next critical support level could be around $47,000, potentially shaking out more short-term investors.
CONTENT
Bitcoin’s recent plunge exposes a divide: newcomers panic-sell while veterans hold steady. On-chain data reveals the contrasting behaviors of investor groups.
WHO IS PANICKING AS BITCOIN PLUMMETS?
As Bitcoin’s price fell below the critical support level of $60,000, a wave of panic selling began in the market, with Bitcoin further dropping to $53,600 earlier today.
(source: TradingView)
But who is selling during this wave of sell-offs? On-chain data provided by CryptoQuant shows that the majority of this selling has come from new investors who entered the market this year, who have been forced out during this “sideways summer,” incurring losses and fleeing the scene.
>>> Read more:
NEWCOMERS INCURRING LOSSES AND FLEEING
According to CryptoQuant’s charts, since the launch of the Bitcoin spot ETF in January, there has been a rapid and substantial increase in new investors. However, these investors are not stable long-term holders.
Beginner investors are capitulating and increasing selling pressure
“Approximately $2.4 billion worth of #Bitcoin aged between 3 and 6 months moved on the network during the drop.” – By @caueconomy
Read more 👇https://t.co/W46LKwg9Hb pic.twitter.com/C3OzfIMbSo
— CryptoQuant.com (@cryptoquant_com) July 4, 2024
Analyst Cauê Oliveira pointed out on Thursday that Bitcoin worth approximately $2.4 billion, held for only 3 to 6 months, was massively transferred and sold during the price drop, with this type of Bitcoin activity showing a significant spike in recent days.
Cauê Oliveira said that these entities that bought in because of the Bitcoin spot ETF could be classified as ‘long-term’ holders, but their actual behavior is more akin to that of short-term investors, as they only entered the market at the beginning of this year.
He believes that these investors likely bought in with the “purpose of speculation” at the same time as the Bitcoin spot ETF, but after the listing, while Bitcoin’s price did break new highs, it did not soar as expected. Instead, it declined back to levels around or even below the cost price, causing distress among short-term investors.
According to LookIntoBitcoin data, the realized price for short-term Bitcoin holders is currently $64,614, about 10% higher than the current market price.
VETERANS REMAIN UNFAZED
In contrast, entities that have held for over a year show no significant signs of selling, according to Cauê Oliveira’s observations. This demonstrates that veterans, having been through numerous market fluctuations, still possess sufficient confidence when facing economic downturns.
Despite Bitcoin’s price having been trading sideways and even trending downward since March, its price has not fallen more than 20% from its historical high of $73,400. Oliveira notes, compared to past cyclical bull markets, this round of Bitcoin has shown remarkable stability.
However, considering the recent panic selling, another analyst from CryptoQuant, Axel Adler Jr., believes that Bitcoin’s next critical support might be much lower than its current price, possibly around $47,000.
The $47K level is 25% below the average purchase price for STH – this will be a good resistance point and a shakeout for new buyers.
Previous organic corrections in the bull market lasted between 110 to 60 days. pic.twitter.com/cmMo5B1pcu
— Axel 💎🙌 Adler Jr (@AxelAdlerJr) July 4, 2024
Axel Adler Jr. pointed out that the $47,000 price is 25% lower than the average purchase price of short-term holders, which would make it a good support level and an important shakeout point for new buyers during the market adjustment: “The organic adjustments during the previous bull markets lasted between 110 and 160 days; whether the market will experience a similar adjustment again remains to be seen.”
TO REMAIN CALM IS THE ONLY WAY
Overall, the Bitcoin market is currently in a fragile phase, with newcomers panicking due to price fluctuations while experienced investors continue to maintain their composure. The future market trend will depend on more market parameters, but what is certain is that as the investor community matures, the stability of the Bitcoin market will gradually improve.
BITCOIN TRADING TIPS
Current situation:
- Price has already dropped to $54,000 range
- Broke through previous support levels
Market dynamics:
- Selling pressure has increased
- Liquidity challenges for sellers
Next potential support:
- Watch for stability around current levels
- Possible further drop to $47,000 as suggested by analyst Axel Adler Jr.
Trader behavior:
- Caution advised for new long positions
- Experienced traders may look for oversold conditions
Key considerations:
- Monitor for signs of price stabilization
- Watch for potential bounce or further decline
- Be aware of increased volatility in current market conditions
>>> Read more:
-
Bitcoin Plunges Below $55,000 as Crypto Market Faces $665M Liquidations
-
2024 Crypto Market Alert: Dangerous Bubbles in Altcoins, Tap-to-Earn, and AI Stocks
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