Bitcoin [BTC] manages to float above $20K despite recent liquidations and heavy outflows
If you’ve been following crypto closely, or even invested in it, chances are you’re wondering if the last bear cycle is over. The truth is that the market remains unpredictable, especially in the long term. Despite this, here are some opinions and observations that will help you better understand the current state of the market.
We recently witnessed heavy liquidations in Bitcoin [BTC] room. Some investment firms that dabbled in Bitcoin, such as Celsius, went bankrupt during the recent crash. The bear market liquidated many highly leveraged positions. Companies like Tesla that had recently invested in BTC dumped their holdings.
Tesla sold 75% of its #bitcoin this week and then Bitcoin just blocked another block and kept going.
— Lark Davis (@TheCryptoLark) 23 July 2022
Assess the market outlook
Despite the large outflows, Bitcoin still managed to quickly recover above $20,000. The recovery demonstrated Bitcoin’s strength despite being stress tested against highly volatile and adverse market conditions. Could this outcome be a sign that the market is ready for a major recovery?
A look at some metrics can help give a clearer picture of BTC’s current position. For example, addresses with more than 100 BTC have drastically reduced sales. The number of such addresses increased significantly since mid-June, thus supporting Bitcoin’s bullish performance.
Source: Glassnode
A small drop in the same metric in recent days suggests the likelihood that increased selling pressure may prevent further upside in the near term. BTC balances on exchanges have been all over the place during the month, but outflows and inflows have relatively balanced out. However, the total address calculation indicates that the number of addresses has grown steadily over the past 30 days.
Source: Glassnode
However, the balance on exchanges has been significantly reduced in recent months. This is a healthy sign in terms of Bitcoin’s long-term performance. It highlights strong demand at lower price levels. Investors have thus taken advantage of the lower prices. However, some exchanges may experience higher balances due to long-term increases in trading volume.
When I read Glassnode reports about bitcoin leaving exchanges I was always like “huh?” The graph below explains it. Over shrinking, but Binance (and BFX) growing.
Also shows relative size of exchanges, on this dimension. pic.twitter.com/7CPWhUJOQp
— CZ 🔶 Binance (@cz_binance) 23 July 2022
Bitcoin’s risk to nature and the FED
It’s no secret that most of the top investors in Bitcoin have held it as a risky asset. This means they have sold or avoided BTC when the US Federal Reserve started raising interest rates. If this trend continues, we will likely continue to see more selling pressure on Bitcoin. A softer approach to interest rates could support more upside.
While the FED holds a chip over BTC’s shoulder, other factors will affect short-term and long-term performance. Regulations and investor sentiment continue to have a significant impact on BTC’s performance. For example, favorable crypto laws from the SEC may favor crypto bulls. The fact that the market recently bottomed is also a healthy sign and improved investor sentiment since June could encourage more buyers.
