as Bitcoin Heading into 2022, a growing cohort of long-term investors doubled their stock of cryptocurrency. Some industry watchers point to the underlying stability of such long-term investments as potentially promising indicators for the erratic cryptocurrency. Now Here’s The BTC Reaching $100k Demand –
Is the capital support from the bulls enough to keep the bears at bay?
Analysis of the ‘balance’
The Bitcoin market is in delicate equilibrium, with limited inbound demand, in addition to a slowing sell side, according to to Glassnode’s March 7th newsletter.
Bitcoin’s price has traded within a volatile consolidation range this week. From recording a high of $45,039 to closing at about $39k, consolidation might even be an understatement.
The same was emphasized by the attached chart, one showing price trading sideways while relative equilibrium prevailed.
But here’s the caveat.
Given the current macro and geopolitical conflicts, Bitcoin bulls have attempted to establish a price floor. According to Glassnode, bulls absorbed a “modest but persistent sell-side pressure for more than two months, largely driven by short-term shareholder divestment.”
This is one of the reasons why the Bitcoin Fear & Greed Index Remained in “anxiety” territory in the past three months.
This can make Bitcoin vulnerable to volatility shocks.
“The limited inbound demand for fresh produce could upset this delicate balance through significant seller exhaustion,” the report added. Or vice versa, reviving sellers.
What is the balance?
Stock market inflows would provide a better understanding of whether investors are preparing to liquidate or HODL their coins. There has been a total net outflow of 46,000 BTC (worth about $1.8 billion at current prices) from all crypto exchanges since July.
Only Binance, Bittrex, Bitfinex and FTX saw net positive inflows of 207,000 Bitcoin. During the same period, net outflows were 253,000 BTC from all other exchanges tracked by the report.
Overall, net outflows encouraged more hodling and general exchange rate balances appeared to be in equilibrium.
On-chain data says…
The report also sheds light on the investor profile of coins sent to exchanges. The three estimates of the investment cost basis (realized prices), as shown in the chart below, revealed some important insights.
On-chain stats maintained a realized price of $24,100 per BTC. This meant that most hodlers achieved a profit margin of 63%. That said, it contrasted with an implied price of $39,200. According to the chart, it hovered just below the breakeven mark, while BTC traded below $39k.
Short-term holders have sold their acquisitions because their position(s) went under water. They recorded an “unrealized loss” of 15% as the average price of coins that moved up the chain in the past 155 days was $46.4k.
In addition, sellers’ profit-to-loss ratio (PnL) showed non-trivial daily losses for more than two months. This corresponded to about 0.5% of the market capitalization per day.
Glassnode also suggested that LTHs were growing tired of selling although “we haven’t seen a major LTH capitulation yet, as we have seen in past cyclical bottoms.”
“The historically low magnitude of both STH and LTH losses may indicate increasing chances of total seller exhaustion.”