New Optimistic Buyers Flock to Bitcoin – Bitcoin Magazine
This is an opinion editorial by Mike Ermolaev, Head of PR at the ChangeNOW exchange and contributor to Bitcoin Magazine.
A long-awaited recovery has occurred for bitcoin prices after a month of consolidation around $20,000. Interestingly, this coincides with the previous cycle peak in 2017.
Short-term momentum remains favorable, while longer-term macro indicators suggest that a firmer footing may take time.
Bitcoin’s 66% decline from its all-time high has largely driven out speculators, leaving only whales and those with strong convictions.
However, a recent trend has seen short-term owners flock to the $20,000 region, where ownership is transferred from capitulating sellers to more optimistic buyers.
Source: Glassnode
At the same time, holders who have accumulated coins over the past six months refuse to liquidate their positions despite large unrealized losses, suggesting that they are less sensitive to market fluctuations.
Source: Glassnode
The Mayer multiple – a multiple of the current bitcoin price over the 200-day moving average – fell below 0.55 at the tail end of this price correction, indicating that the market is trading at a 45% discount to the 200-day moving average. Bitcoin prices have historically formed cyclical bottoms below this level, but this has been rare, occurring less than 3% of the time.
Source: Glassnode
Right now, bitcoin appears to be eclipsing that level after being below it for some time. This means the worst of the bitcoin bear market is likely over, if history is any guide.
There is also an interesting interplay when the cost basis for the long-term owners rises above the overall cost basis for the wider market (the realized price). For the long-term owners’ realized price, long-term owners must either buy coins above the cost basis or wait until coins with a higher cost basis mature beyond the 155-day limit. This is rare during a bear market.
The realized price climbs above the long-term owners’ realized price in times of market bottoms, sustained strength and sufficient demand to compensate for profit taking. Historically, low deviations in the bear market have lasted between 248 days and 575 days. A period of 17 days has been in effect for the current cycle, a relatively short time frame.
Source: Glassnode
BTC price is determined by macro
Although we wanted bitcoin to be independent of traditional markets and macroeconomic indicators, this is not the case right now. With the entry of large institutional players and their enormous amounts of liquidity, this dependence has intensified. Therefore, the behavior of digital assets is affected by global liquidity flows.
This is why M2 money supply, which includes physical cash, deposits and less liquid money including bank savings accounts, can be a leading indicator of bitcoin’s price movement.
Also, as we can often see on ChangeNOW, the S&P 500 and bitcoin prices are closely correlated. From a larger perspective, the S&P is driven by the consolidated balance sheets of major central banks. In general, a rising S&P 500 is associated with expanding central bank balance sheets, and the same is true for bitcoin.
Source: Yardeni.com
So you can get a sense of bitcoin’s future by monitoring the aggregated central banks’ balance sheet chart.
The bottom line
By analyzing bitcoin’s on-chain activity, ChangeNOW can see that long-term owners, who are less affected by bitcoin price volatility, never exited the market, while short-term speculators escaped during the recent selloff, allowing more optimistic buyers to enter . Meanwhile, when we look at global liquidity flows originating from major central banks, we can get a sense of what is happening to bitcoin’s price, as well as what is coming in the near future. It doesn’t matter if you are a strong long-term bull, a capitulating seller, a fresh buyer or just watching from afar, we all need to understand the logical side of this seemingly chaotic bitcoin market.
This is a guest post by Mike Ermolaev. Opinions expressed are entirely their own and do not necessarily reflect the opinions of BTC Inc. or Bitcoin Magazine.
