Bitcoin ‘great detox’ could trigger a BTC price drop to $12K: Research

Bitcoin (BTC) is in a ‘scary state’ in terms of adoption – but a silver lining is already visible, new research says.

In the latest edition of its weekly newsletter, Week On-Chain, crypto analytics firm Glassnode said Bitcoin was going through a “major detox”.

Bitcoin adoption dates back to March 2020

Current BTC price measures are squeezing everyone from long-term holders (LTHs) to miners, and relief is hard to come by.

Macro turmoil and $20,000 resistance keep BTC/USD at levels visited only once since 2020.

With this week’s push above $20,000 accompanied by big gains, warnings remain that more pain is due to the market before a recovery takes place.

For Glassnode, sustained lower levels are causing a seismic shift in the Bitcoin investor profile, with retail and speculators – so-called short-term holders (STHs) – now squeezed out.

“Network activity remains in a severe state as network adoption levels decline to levels last seen during the COVID crisis,” it summarized.

“However, a constructive observation would be the expulsion of retail participants from the network, leaving only the HODLers class, career traders and regular Bitcoin users. This suggests that the user base is at its basic level.”

This reset in network composition can give a positive nuance in the face of flatlining on-chain adoption.

LTHs, as Cointelegraph reported this week, are notorious for their stubbornness during bear markets, and data shows they are in no mood to sell.

“The HODLer class remains resolute with both mature coin USD wealth reaching ATHs and a number of lifetime values ​​fully reset to historic lows, underscoring a reluctance to spend held coins,” Glassnode continued, referring to its latest data analysis.

“This suggests that the majority of today’s market exit is associated with the short-term holder class.”

“Large supply airgap” threatens a return to $12,000

Despite the growing prevalence of LTHs as an investor majority, STHs could still provide some dramatic downside in the event Bitcoin falls below the $17,600 macro low of June this year.

Related: BTC Price Stays Below $19K Amid Hopes Q4 Will End Bitcoin Bear Market

This, Glassnode explains, comes as a result of the volume gap below that level – meaning any selling could easily enter the next bid zone, currently at $12,000.

“A big air gap in supply is apparently below the $18k to $11k–$12k range,” says Week On-Chain elsewhere.

“Trading during the current low cycle will put an extraordinary volume of short-term coins into a deep unrealized loss, which could exacerbate the downside reflexivity, and trigger another widespread capitulation event.”

An accompanying chart showed the lack of volume between the two price ranges, this in sharp contrast to the area around $20,000, now full of STH interest.

Macro factors, meanwhile, have mainly contributed to other warnings about BTC price stability in recent weeks and months, with predictions including BTC/USD falling below $10,000.

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