bitcoin (BTC) could undergo one last bear market capitulation if “whales” — addresses holding more than $1 million worth of Bitcoin — increase their selling pressure, according to on-chain analyst Willy Woo.
Room for another Bitcoin crash?
Court court the average price at which short-term investors entered the Bitcoin market throughout history and recorded the daily change in value. That resulted in a cost basis, a metric that signals when “inexperienced” traders sell BTC to “experienced” traders during a BTC free fall, which usually coincides with the bottom of the market.
The cost base saw significant declines during previous bear markets, also before a strong buildup occurred, as shown in the chart below. Curiously, Bitcoin's ongoing correction — from $69,000 in November 2021 to around $39,000 in March 2022 — hasn't resulted in a massive drop in its cost base.
“It is not conclusive if we have capitulated yet,” Woo said, adding that “there is room for another drop” based on the cost basis signal.
Whales have been selling their BTC
Woo's perspective came in line with growing speculation about the next big Bitcoin crash. For example, Christopher Yates, publisher of AcheronInsights, said that the price of BTC could drop to $30,000 due to the “deteriorating macro environment."
“What makes me increasingly cautious that the low is not yet in 2022 is the fact that we have yet to see a capitulation style volume spike that has occurred at all of the recent lows in late 2019, early 2020 and mid 2021". yachts wrote in his latest BTC analysisadding:
"Although not a prerequisite for a market bottom, a capitulation-like increase in volume helps give us confidence for when that bottom may be close."
Data resource ecoinometry provided evidence of the demand gap between small and wealthy Bitcoin investors in its latest weekly report. For example, he noted that addresses holding up to 10 BTC have been accumulating coins in the last 30 days.
On the contrary, those who have more than 10 BTC have been distributing them.
Woo also noted that Bitcoin whales have been selling his stash, thus maintaining downward pressure on the price. That means small investors have been soaking up the sell-side pressure and have so far prevented the price of Bitcoin from falling below $30,000.
Additionally, Ecoinometrics analyst Nick noted that the ongoing accumulation trend is "as slow as it gets," adding that it could weaken after the Rate hike expected by the Federal Reserve in March to control rising inflation. Extracts:
“Long story short, the Fed is in control. If they mess up their tightening cycle, all risk assets will go under. Bitcoin currently trades as a risk asset, so it is unlikely to be an exception.”
Analysis from Ecoinometrics and Willy Woo also shows that inexperienced investors have not dumped their coins, thus becoming long-term holders (LTHs) in the process.
Bitcoin is "most deflationary" in history
Meanwhile, another metric called “LTH Inflation/Deflation Ratio” is also corroborating the aforementioned theory, according to ARK Invest on-chain analyst David Puell.
In detail, Bitcoin inflation points to LTH releasing its BTC into circulation faster than the natural sell side of miners. Rather, deflation suggests that LTHs have absorbed a proportional amount from the miner's sell side every day along with the total outstanding supply.
Related: crypto vs. Physical: Musk-Saylor Inflation Debate Comes Down to Scarcity
The attached graph below shows the LTH inflation/deflation ratio showing the period of inflationary results in red and the deflationary readings in green.
“Our analysis suggests that Bitcoin, proportional to the supply of long-term holders (LTH), is at its most deflationary point in history,” noted David Puell, on-chain researcher at ARK Invest.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should do your own research when making a decision.
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