Last week was brutal for cryptocurrency markets, as Bitcoin fell to $31k and the entire market cap lost nearly one trillion dollars in value. We have seen the highest trading volumes in Bitcoin, and at the time of writing this article, it is around $88.19 billion. The entire market was struck so hard that the trading volumes increased by 55.44%. With this level of trading activity, the market sentiment has turned to extreme fear. Take a look a the Fear & Greed Index below:
If we look at the historical values, we can see that the fear and greed index dropped from 37 to 10 in a month. Retail investors and first-time bitcoin buyers are selling off with extreme fear, while long-term holders take advantage of this situation and accumulate more digital assets. Now, the question is- which side are you on? If you plan to buy the dip and hold it for years to come, you are going in the right direction.
On the other hand, if you are preparing to book losses and exit the trade, you have to ask yourself the following questions:
- Did the fundamentals of bitcoin change in the last five days?
- Are you making decisions based on emotions or data models and studies?
- Have you researched previous bull and bear cycles?
- Can Elon Musk or any entity have influence over the market for the next 5 or 10 years?
Once you reflect upon these questions, you will understand- nothing has changed with bitcoin. The only difference is that we now have more crowd involved, resulting in a much drastic price difference and pullback from the previous ATH.
Now, the biggest question you want to know- Is this the END of the BULL RUN?
It’s not, and here are 5 reasons why:
#1 Massive inflows of stable coins on exchange- Everyone is ready to buy
The 48% drop in bitcoin might seem scary at first, but if you look at all exchange reserves, the data indicates that most holders have converted their portfolio into USD. This means that people are waiting to get the right play at the right price. If we see the graph below, we can see that the money left in the exchanges’ wallets drops whenever the price of bitcoin increases.
With the current economic climate of the market, we see different conditions for exchange reserves- price drops and exchange inflow increases. This means that we will see 14 billion dollars stored in the reserves being re-invested into crypto assets.
#2 Whales are going all-in at these lower levels
Long-term bitcoin holders are again heavily investing into bitcoin to accumulate as much as possible before it hits $100k by the end of the year or first quarter of 2022. From the list of top bitcoin holders, we have seen two addresses making some large transactions acquiring thousands of bitcoins at a buying price ranging from $32k to $42k. The richest bitcoin holder bought 34,000 bitcoins at an average price of $37,483. You can see the transaction details below:
In our recent article, we mentioned a mysterious whale buying 3521 bitcoins at a significantly lower price- well, he is done it again. He acquired nearly 3000 bitcoins at an average price of $39,065.
Such activity by top bitcoin holders indicates that they truly believe it will go past its previous ATH in the coming months and the bear cycle has not yet started.
#3 Institutions are bullish on Bitcoin
If we go back to January and take a look at the price action of Bitcoin, we can understand how strong it was with institutional support. The core of the markets got shaken up when Elon Musk brought in many retail investors, and the price skyrocketed in a matter of weeks. Now, as they are scared and fearful about the future of bitcoin with all the news coming from China, they are selling off their positions.
As the prices are going down and down, every major company is looking to add bitcoin to their balance sheet. Institutions are considering this as a major buying opportunity, and they are taking it all away from first-time and small retail investors.
#4 Correction is a part of the market cycle- it will be over soon
The phrase “Just getting started” is not relevant for any digital asset right now. People all over social media platforms are sending this message to their audiences, and everyone is thinking- bitcoin will only go up forever. Guys, that is not how market cycles work!
We see major and minor corrections in each cycle, and we have to be prepared for anything coming our way. We can see that bitcoin had four or more major corrections if we look at the data from coinmarketcap on market corrections over the last two bull ru
If we scope out in the trading charts and look at how bitcoin performed during those cycles, you will understand that corrections are a part of market cycles and will happen before bitcoin outperforms.
#5 China is spreading nothing but FUD
The Chinese recently claimed they are banning cryptocurrency services for financial institutions, and this was a major tip-off for many retail investors, which made them exit the markets. In reality, the Chinese government bodies are doing everything possible to raise unnecessary fear and doubt. They have conducted similar bans in 2013 and 2017, but it was re-evaluated in a couple of years. If we take country-wise trading volume, we will see China in the top ten, so we cannot assume that China is completely against cryptocurrency. Likely, they are also in the accumulation phase.
Finally, the most important thing to understand here is- crypto markets may experience something different in each bull cycle, and we cannot straight away say that we are in a bull market. It is so dangerous to look at it that way because some arbitrary number or percentage cannot define future price action. If we take a look at the Bitcoin Logarithmic Growth Curves, we can see that bitcoin finds a way to overcome the correction and rally upward even when the price drops below the curve.
One thing is for sure- bitcoin is here to stay, and no one can do anything about it to alter its course in the future. With the current market situation, you need to make decisions based on data and price action, so never follow someone’s advice blindly without doing your own research. The underlying technology is rock solid, and it can change the landscape like no other, so believe in the future of bitcoin and understand how it can change millions of lives. Such corrections may happen again in a couple of months, but you should be prepared for any situation.
Born and brought up in India, Karthikeya Gutta is a crypto journalist and freelance contributor for ItsBlockchain. He covers various aspects of the industry with in-depth analysis and research. His passion towards blockchain and crypto ecosystem is mainly because he believes it can really change the world and help millions of people.
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