Crypto Weekly Roundup: Remember BTC At $78,500?
May 21, 2021
So… this week just happened.
Throughout the week, we had several folks on Twitter going “buy the dip,” but the price hasn’t stopped dipping!
So, what exactly happened? Why is the market behaving the way it is? Let’s take a closer look.
Bitcoin Crashes….and Crashes
Bitcoin price crashed below the $50,000 psychological mark this week, and as you’d guess, crypto Twitter had a major meltdown. The following chart shows Santiment’s social volume metric.
I tend to use this chart quite a bit, and for a good reason. Spikes in the social volume metric happen when there is a lot of chatter around a particular topic (in this case, Bitcoin). Usually, these spikes indicate periods of FOMO and FUD that lead to either a rise or a fall in price.
So, what caused this FUD? Well, I have one word for you — China.
China Bars Financial Institutions From Dealing With Crypto Businesses
China announced that they will be banning financial institutions and payment companies from providing services to companies that deal with cryptocurrencies. Individual investors are not banned from holding cryptocurrencies. These services include registration, trading, clearing, and settlement.
So, why did China do this? This is what the National Internet Finance Association of China, the China Banking Association and the Payment and Clearing Association of China said:
“Recently, cryptocurrency prices have skyrocketed and plummeted, and speculative trading of cryptocurrency has rebounded, seriously infringing on the safety of people’s property and disrupting the normal economic and financial order.”
Regardless, the ban has sparked off a selling frenzy. Along with Tesla’s recent retraction of Bitcoin payments, and the inflation of dog meme coins, the market has reacted very negatively.
Are Holders Buying Or Selling?
Actually…both!
Obviously, there is a massive sell-off happening right now, which has crashed the Bitcoin price. In fact, let’s check the exchange inflow metric. As you can see, there are several spikes in the inflow chart, which shows that a lot of holders are sending their coins to the exchanges to sell them off and earn profits.
However, at the same time, there are some huge spikes in the outflow metric as well. This shows us that there are a bunch of holders who are actively buying the dip and bolstering their holdings.
Now, when we look at the holder distribution chart, we can see that addresses that hold at least 10,000 Bitcoins have increased by 3.
One of these super whales happens to be MicroStrategy, who has spent around $25 million to buy more BTC. As of now, the company holds 92,079 bitcoins worth $2.25 billion total for about $24,000 per BTC.
Having said that, it seems like the number of daily active addresses engaging with the Bitcoin network has decreased steadily over time. This is a pretty negative sign since this shows that the network is gradually weakening.
In Closing: Bringing This All Together
Alright, so what exactly is going on here. Unfortunately, I wish I had something new to say here. The story remains the same. The newbies are selling, and the old dogs are gobbling up the coins. Glassnode co-founders Yann & Jan shared this chart:
It seems like 70% of Bitcoin’s short-term holders are panic-selling their coins at a loss. In fact, let’s also check the “Age Consumed” metric by Santiment.
You see, there is just one distinct spike for the last two days in this chart. What this tells us is that the coins that are moving between addresses are relatively young. In other words, newbie traders panic-selling. The OGs, on the flipside, have diamond hands…
…and are not looking to sell off anytime soon.
