As a seasoned crypto investor with a decade of experience navigating the rollercoaster ride that is the Bitcoin market, I find myself bracing for impact as the current sell-off threatens to push prices below my last buy-in. August started promisingly, but the relentless wave of selling pressure has turned the tide once again.
Bitcoin is currently experiencing a downturn, battling against a strong tide of selling activity. Despite initial optimism on August 23, the currency began the month with a more resilient stance; however, sellers have remained persistent.
Looking at the daily graph, it appears that the upward trend’s momentum is starting to weaken, and the price movements are primarily happening within the lower part of the consolidation period. The current support area lies between approximately $56,500, which corresponds to the July lows, and around $58,000, near the August 27 lows.
Fewer BTC Holders Are Making Money: Who Are Dominant?
With each dip in the coin’s value, it appears that fewer investors are reaping profits from the current market prices. Based on one analyst’s assessment of blockchain data, there has been a decrease of around 25% in the amount of Bitcoin being held by profitable investors. Translated into numbers, this amounts to approximately 4.9 million Bitcoins that are currently in the red and distributed globally among various entities.
Approximately 5 million Bitcoin, which is five times the amount owned by Satoshi Nakamoto, is currently in a vulnerable position due to its red status, implying potential instability in price movements. If it’s found that most of these coins are held by short-term investors, there could be an increased chance of price drops occurring. However, the analyst didn’t specify who the majority holders are.
Entities that have recently purchased Bitcoin (within the past 155 days) typically fall into the category of speculators. These wallets often sell their Bitcoin when the price drops significantly, contributing to the downward market trend.
Conversely, if the greater portion of investors are long-term investors (those who bought more than six months ago), this could bring comfort to those holding the asset. In fact, their continued holding might provide a foundation for the price to rise towards $66,000 or even higher. The majority of long-term investors consist of institutions and HODLers, who tend not to be swayed by short-term market fluctuations.
Bitcoin Liquidity And Active Address Count Falling
Despite a growing number of Bitcoin (BTC) holders experiencing losses, it’s additionally being noted that the Exchange Liquidity Ratio is running low. Speaking with X, the analyst explained that at current market prices, this ratio – which gauges overall liquidity in the BTC market – is lower than its 365-day moving average. This suggests that most traders are hesitant and prefer to stay out of trading activity.
In an upward moving market, liquidity often increases, but it’s likely to remain low until there’s a significant change in direction. If prices continue to fall, though, volatility will significantly increase. Despite this, the immediate and short-term impact is likely to be reduced liquidity as traders choose to stay cautious and wait for the market trend to clarify before making moves.
Accompanying falling liquidity is also a worrying trend. One analyst on X notes that the number of active addresses on the Bitcoin mainnet is at 2024 lows. Falling address activity indicates a general decline in investor interest, translating to low engagement.
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2024-09-06 15:41