HODLer is still adding positions amid the BTC panic decline?

Abstract: On-chain, we can observe a clear fork reaction, with new entrants panic selling and suffering losses, while long-term holders seem to be relatively unaffected by the news.

Bitcoin prices traded down more than 26.1% this week as a series of tweets from Elon Musk raised concerns about the power consumption of mining. After opening the week at a high of $59,463, the tweet saw Bitcoin price slip to $43,963.

Musk’s tweet addresses the negative externalities of energy consumption and posits that 10x scaling and larger blocks on Dogecoin are a viable alternative. Unfortunately, this has caused widespread confusion in the market, although for many Bitcoin HODLers, this is just another day of calm.

On-chain, we can observe a clear fork reaction, with new entrants panic selling and suffering losses, while long-term holders seem to be relatively unaffected by the news. There are many supply and demand dynamics similar to the 2017 macro top, but with some idiosyncratic differences that will challenge the beliefs of both bulls and bears.

BTC breaks through the $51,500 mark with an intraday increase of 5.81%: According to data from Huobi Global, BTC has risen in the short term, breaking through the $51,500 mark, and is now trading at $51,500.83, an intraday increase of 5.81%. The market fluctuates greatly, so please do a good job in risk control. [2021/3/3 18:11:40]

Measure the size of the correction

First, we will assess the size of this correction compared to the 2017 and 2021 bull markets. The current correction is 28% below the ATH of $63.6k on April 13. This is the deepest correction in the current bull market, yet coincides with five major retracements in the 2017 bull market.

In terms of the duration of the bull market, the primary bull market in 2021 has lasted about 200 days, which is relatively short compared with the year-long bull market run in 2017.

The number of addresses currently in profit provides a view of the market below the equilibrium line. We can observe that this correction resulted in over 23% of on-chain addresses being in the red, compared to only three uptrend periods since 2016. The pullbacks for all of these comparisons are related to relatively extreme events.

BTC rose by more than 1.00% within 5 minutes: According to data from Huobi Global, BTC/USDT fluctuated violently within 5 minutes, rising by more than 1.00%, reaching 2.03%. The current quotation is $6705.01, and the market fluctuates greatly. Please pay attention to risk control. [2020/3/24]

In 2016, after a 2-year bear market, the retracement after the rally left the bottom.

In 2019, after a 1.5-year bear market, the pullback after the rally was largely driven by leveraged short sellers being squeezed.

2020, consolidation following global uncertainty following the March 12 COVID sell-off.

New entrants panic selling

Panic selling by new entrants took their toll, with both aSOPR and STH-SOPR falling below 1.0 again. Both metrics take into account the degree of profit achieved by cryptocurrencies moving on-chain, with higher numbers indicating profitable coins are moving, while values below 1.0 indicate that most coins end up at higher prices move.

MXC Matcha Leveraged ETF Big Data: BTC long-short position ratio 6:1: BTC market is still bullish. The concept of halving and anonymity continues to attract the attention of funds. The total long-short positions of BCH, BSV, DASH, and ZEC increased by 7%, 89%, 45%, and 17% respectively compared with yesterday, and the total long-short positions of BCH and BSV increased by 75% respectively. , 497%. Tether announced yesterday that it will issue USDT based on the BCH chain. This morning, Tezos (XTZ) announced that Vertalo will issue 22 security tokens worth $200 million on the Tezos chain.

(The above views do not constitute investment advice, pay attention to investment risks)[2020/3/21]

The aSOPR metric takes into account the entire market, while also filtering out all coins with a lifespan of less than 1 hour (these coins are usually temporary ticks and thus not economically important). STH-SOPR filters only cryptocurrencies less than 155 days old and thus represents entities buying cryptocurrencies during the current bull market cycle.

Both metrics have dropped below 1.0, indicating that overall losses have been realized on-chain, with the effect being most pronounced in STH-SOPR. This is the second time that STH-SOPR has fallen below 1.0 in this correction, indicating panic selling by a large number of new holders.

Treasurer Investigation Bureau | Vice President of MXC Matcha: BTC will break through to new heights: In today’s Treasurer Investigation Bureau, what is your prediction for the market in 2020? Which areas have opportunities? What types of projects will become this year’s Focus?" question, Henry Wu, vice president of MXC Matcha, said: From the perspective of digital asset trading, from my personal point of view, BTC will break through to a new height. First of all, the market has a high consensus on the "halving market", and confidence is gold;

Secondly, the "halving market" will affect the behavior of miners, who were a stable selling force before;

Third, the emergence of new Defi applications has accelerated the lock-up of mainstream assets, and the emergence of new ETF products is also activating the market and providing institutional funds with better trading tools;

Fourth, cross-chain projects provide new infrastructure for the industry. When multiple encrypted assets can be linked to each other, new application scenarios may be born.

The market has a rotation effect, so if the market continues to develop, high-quality projects will have opportunities, including investment and financing will be more active. Projects with relatively high technical consensus and projects that can find their own profit model may be the focus of my attention. There may also be opportunities in the stablecoin track. DECP and Libra are changing the gameplay of this track and giving birth to new possibilities. [2020/2/18]

Quotes | 312,875 new BTC addresses were added yesterday: Searchain.io data shows that 312,875 new BTC addresses were added yesterday, the number of active-zce addresses was 621,370, and the total number of BTC transactions was 750,224.67. Yesterday, the number of BTC inflows into exchanges was 41,810.66, the number of BTC outflows from exchanges was 24,924.20, and the net value of inflows and outflows from exchanges was 16,886.46. [2018/10/10]

The total number of addresses holding non-zero BTC balances has also retreated 2.8% from its recent all-time high of 38.7 million addresses. A total of 1.1 million addresses sold all their cryptocurrency holdings during this correction, providing evidence that panic selling is currently underway.

If we look at the cyclical patterns in the total supply held by short-term holders (STH), we can also see that a pattern of panic selling is playing out, similar to what was observed at the macro peak in 2017. What this graph shows is that the Bitcoin market tends to find a local or macro peak when new holders own a relatively large proportion of the total supply (i.e. larger cryptocurrency supply held by newer addresses ).

However, it is important to note that the current peak of STH-owned cryptocurrencies is significantly lower than in 2017, both in terms of number of cryptocurrencies and percentage of circulating supply. The cryptocurrency in new holders recently reached 28% of the circulating supply (5.3M BTC), which is 9% less than its peak in 2017.

Given that Bitcoin trades at a larger market valuation, this may reflect greater capital inflows, which require an advantage in market cap size. It may also provide a sign that this could be a pullback on a larger timeframe in the bull cycle, as the weak capitulate and the strong resume accumulating cheaper cryptocurrencies.

Exchange Traffic Dynamics

Given our observations of panic selling, total BTC inflows to exchanges reached a notable high, with a net inflow of 27,500 BTC observed at the start of this latest correction phase. This is second only to the March 2020 sell-off and the 2019 PlusToken Ponzi scheme in size.

However, if we break this observation down to the two largest exchanges, Binance and Coinbase, we can see two different realities.

Binance, which primarily uses non-U.S. citizens and is the venue of choice for retail investors, was the main recipient of this net inflow. We can also see that both inflows and outflows have increased in size over the past few months, suggesting that the macro sentiment among Binance users is volatile. This further suggests that the recent inflows may have been driven by new market entrants (panic sellers) or by a shift of capital to other cryptoassets.

Conversely, Coinbase has seen almost complete net outflows of BTC since breaking above the $20K ATH last cycle, a trend that continues this week. Coinbase is the venue of choice for U.S. institutions, and given the typical daily withdrawal size (10,000 to 20,000 BTC/day), this suggests that larger buyers are still actively accumulating crypto during this correction.

Long-term holders are buying on this dip

In almost the exact opposite of panic selling by new entrants, long-term holders appear to be buying the dip and accumulating cheaper cryptocurrencies. While the number of non-zero addresses fell in this correction, the number of addresses in accumulation has increased by 1.1% since the most recent low. Accumulation addresses are defined as those that have at least two buy transactions, but never sell any cryptocurrency.

Likewise, cryptocurrencies held by long-term holders (LTH) are back in growth mode, which again resembles the 2017 macro top. This chart primarily reflects buyers who bought cryptocurrencies in late 2020/January 2021 but have not yet sold. As the supply of LTH starts to rise, this shows that the amount of cryptocurrency maturing beyond the 5-month dormant period exceeds the amount of old coins sold for profit.

The current supply of LTH is more than 2.4 million BTC more than the peak in 2017 (accounting for 8% of the circulating supply). This shows that large amounts of cryptocurrencies have been moved to and held in illiquid cold wallets, and this trend is continuing.

Overall, the Bitcoin market is in the midst of a historic major correction. There are strong signals that short-term holders are leading the way with panic selling, while long-term holders are stepping in to buy the dip with little wavering in their confidence. The narrative of PoW energy consumption has had little market impact, to say the least, and what follows will be a test of faith in the entire Bitcoin market.

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