Bitcoin is currently consolidating at around the $20,000 mark, and there is some sense of vague optimism around this range. Several analysts have suggested that Bitcoin could bottom around this price point.
Another selling streak was observed in the market and what’s interesting about it is that it isn’t related to short-term holders this time. In this article, we will analyze the current situation in the ecosystem and understand if Bitcoin is gearing up for a significant drawdown period or post-correction recovery.
No Sugar-Coating for Bitcoin anymore
According to Glassnode, Bitcoin registered the most significant USD-denominated Realized Losses in the past 3-days. More than $7 billion in losses with locked in by investors, but the massive blow was that these investors had accumulated strongly during the bull run.
Data indicated that close to 555k BTC moved between $18,000 and $23,000, and additionally, the movement was further triggered by the revived supply of more than one year old. In simple terms, the coins accumulated during the 1st half of 2021.
Certain losses suggested that few Bitcoin LTHs have lost close to 75% of their value, and between shrimps and whales, the total unrealized losses are worse than that of March 2020. Currently, only 49% of the total BTC supply is in profit, and historically, bear market consolidation takes place around 40% to 50%.
Will Institutions follow suit and pull their investments?
While LTHs and STHs addresses were bathing in collective losses, 3rd-party BTC allocation organizations also painted a downward picture. According to Coinglass, the Grayscale Bitcoin Trust or GBTC dropped to 34.09%, meaning there is a negative premium for every GBTC unit, and investors’ allocated funds are not at a state of profit.
Q3 is right around the corner, and Q2 2022 will conclude on one of the largest downtrends in Bitcoin’s history. The market will vigorously test Bitcoin investors’ conviction to hold on to their assets in the next few months. The larger macro-economic ecosystem is strongly bearish, and the Federal Reserve continues to attain a hawkish view.
The $20,000 mark is a vital range right now, and further slip-offs can cause further panic. The market will test investors’ patience, and risk management is more critical than ever.