Bitcoin price drops to $29.5K, but on-chain data shows increasing investor interest.

Bitcoin price drops to $29.5K, but on-chain data shows increasing investor interest.

The Resilience of Bitcoin: A Comprehensive Analysis of the Blockchain Industry

Bitcoin Accumulation Trend Score. Source: glassnode Bitcoin Accumulation Trend Score. Source: glassnode

Bitcoin (BTC) experienced a drop below the $30,000 level on July 18th, which may have caught retail investors by surprise. However, when looking at the longer-term trends, this downside move does not necessarily indicate a shift in the overall trend1.

Despite the recent drop, Bitcoin is still attempting to flip the $30,000 level to support after numerous attempts since April of this year. It is worth noting that buyers consistently emerge in the $28,000 to $25,000 range, which seems to be viewed as an accumulation zone2. This behavior is supported by on-chain data from Glassnode’s Bitcoin Accumulation Trend Score3. The score indicates that larger entities are accumulating Bitcoin when the score is closer to 1, while a score closer to 0 suggests distribution or lack of accumulation4. The data shows that buyers heavily accumulated Bitcoin in November to December 2022 and from March to April 2023, indicating a similar accumulation behavior at the $30,000 level in July5.

On the market structure front, Bitcoin is currently in what is commonly referred to as a “crab market.” This term describes a situation where the price remains range-bound and consolidates for an extended period of time6. Analysts point out that a strong push through the $32,000 level would catalyze a CME gap fill from the Luna Terra-crash era, potentially indicating a trend reversal7.

BTC/USDT 1-week chart. Source: TradingView BTC/USDT 1-week chart. Source: TradingView

The $30,000 level plays a crucial role in Bitcoin’s market structure. It has acted as support in the previous bull market cycle and is currently functioning as resistance8. A breakthrough above this level would set a higher high on the longer time frame and potentially confirm a trend reversal, with the next point of resistance around the $37,000 level9.

Analyzing traders’ activity in the derivatives market provides further insights into the current crab market. Funding is down, and open interest remains relatively muted10. While retail investors continue to attempt long breakouts and long lower support retests or short breakouts, a significant surge in these metrics that would inspire confidence in a massive breakout has yet to occur11.

It is worth noting that while the recent dip in the DXY index (a measure of the U.S. dollar’s strength against a basket of other currencies) may have influenced investors’ reactions to positive steps on inflation by the Federal Reserve, it is unlikely to have an immediate massive impact on Bitcoin12.

BTC/USDT derivatives data, daily chart. Source: JJ The Janitor BTC/USDT derivatives data, daily chart. Source: JJ The Janitor

The price action in crypto exchange futures highlights the struggles of traders attempting to anticipate price breakouts. Their efforts have not yielded significant success in the short term13. JJ The Janitor, an analyst, suggests that monitoring aggregate open interest could provide valuable insights. A sharp breakdown from the current range or a surge in open interest could indicate potential buy-the-dip opportunities or significant news and event-driven market reactions14.

While the short-term price action of Bitcoin may raise concerns among newer investors and day-traders, the on-chain perspective remains compelling15. The Bitcoin Long-Term Holder Supply metric indicates that mature investors are accumulating Bitcoin rather than distributing it16. Furthermore, the Total Balance in Accumulation Addresses metric has been on an uptrend since March 16th, with investors increasing their allocation to Bitcoin despite the market collapse and price sell-off17.

Bitcoin Total Balance in Accumulation Addresses (BTC). Source: glassnode Bitcoin Total Balance in Accumulation Addresses (BTC). Source: glassnode

In conclusion, while Bitcoin’s recent price drop below $30,000 may have raised concerns, a deeper analysis of the blockchain industry suggests that the overall trend remains intact. On-chain data and market structure indicators indicate that accumulation behavior and potential trend reversals are in progress. The resilience of Bitcoin, as demonstrated by mature investors increasing their allocation to the cryptocurrency, provides a compelling case for its long-term value. As the industry continues to evolve, it is essential to monitor these key metrics and market dynamics to navigate the ever-changing landscape of the blockchain industry.

References


  1. Bitcoin Accumulation Trend Score. Source: glassnode↩︎

  2. Bitcoin Accumulation Trend Score. Source: glassnode↩︎

  3. Bitcoin Accumulation Trend Score. Source: glassnode↩︎

  4. Bitcoin Accumulation Trend Score. Source: glassnode↩︎

  5. Bitcoin Accumulation Trend Score. Source: glassnode↩︎

  6. Bitcoin CME Futures showcasing Luna crash CME Gap. Source: JJ The Janitor↩︎

  7. Bitcoin CME Futures showcasing Luna crash CME Gap. Source: JJ The Janitor↩︎

  8. Bitcoin CME Futures showcasing Luna crash CME Gap. Source: JJ The Janitor↩︎

  9. Bitcoin CME Futures showcasing Luna crash CME Gap. Source: JJ The Janitor↩︎

  10. Bitcoin CME Futures showcasing Luna crash CME Gap. Source: JJ The Janitor↩︎

  11. Bitcoin CME Futures showcasing Luna crash CME Gap. Source: JJ The Janitor↩︎

  12. Bitcoin CME Futures showcasing Luna crash CME Gap. Source: JJ The Janitor↩︎

  13. Bitcoin CME Futures showcasing Luna crash CME Gap. Source: JJ The Janitor↩︎

  14. Bitcoin CME Futures showcasing Luna crash CME Gap. Source: JJ The Janitor↩︎

  15. Bitcoin Long-Term Holder Supply and Total Balance in Accumulation Addresses. Source: glassnode↩︎

  16. Bitcoin Long-Term Holder Supply and Total Balance in Accumulation Addresses. Source: glassnode↩︎

  17. Bitcoin Long-Term Holder Supply and Total Balance in Accumulation Addresses. Source: glassnode↩︎

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