As the downtrend in cryptocurrency continues, the outlook for the entire ecosystem is dimming. Three Arrows Capital (3AC), a Singapore-based crypto venture capital company, appears to be its next victim.
Investors are starting to accept the reality of a prolonged bear market as large crypto projects and investment companies begin to fall on a weekly basis.
According to a Twitter poll by Plan C (market analyst) and pseudonymous Twitter user, 41.6% said that the Bitcoin (BTC), bottom would fall in the $17,000-$20,000 range.
The total Bitcoin supply and profit held by short-term investors. Source: Twitter
A new high is reached by ddresses with at least 1 BTC
Many traders would expect that in the face of Bitcoin’s rapid price drop and volatility, they will dump their Bitcoin holdings and run to the sidelines to preserve their purchasing power.
Although many traders have been forced out by falling prices and liquidations, some investors have been drawn to low-priced Bitcoin.
Number of Bitcoin addresses with a balance greater than 1 BTC. Glassnode
The data shows that at least 1BTC is held by Bitcoin addresses. It appears that this number will continue to rise if buyers continue to flock to bitcoins below $20,000 BTC.
Related: Is there a bottom? Scaramucci, Raoul Pal and Scaramucci load up. Novogratz, Hayes, and I weigh in.
“BTC is more affordable than it appears”
Market tops and bottoms can be overreactions to developments. Retail traders are more likely to FOMO when prices are rising but are quick to sell when bad information starts spreading.
Jurrien Timmer (director of global macro at Fidelity) provided a more nuanced analysis on the current Bitcoin value. He posted the following chart, and asked if Bitcoin is “less expensive than it appears.”
Value vs. Bitcoin price Source: Twitter
If we take the “P/E” metric of BTC as the price/network ratio, that ratio returns to 2017 and 2013, even though BTC itself is still at late 2020 levels. Valuation is often more important than price.
Timmer stated that BTC is currently priced at less than its fair market value using the Bitcoin dormancy indicator. This indicates “how technically oversold [it]”.
Bitcoin dormancy flow. Source: Twitter
“Glassnode’s dormancy indicator has reached levels not seen since 2011”
The combination of Bitcoin addresses with more than 1 BTC and the asset’s historically high price and low price/network ratio suggest that there may be a downside to the investment.
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Eileen Wilson –Technology and Energy
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