According to data from the market intelligence platform Glassnode, most Bitcoin investors are unfazed by the volatile market and Bitcoin’s abrupt 50 percent drop in the past five-month. According to Glassnode:
“[The Unspent transaction output] metrics suggest that investors are staying put despite being at a loss. After Bitcoin’s local top in June, fewer transactions require less UTXOs to be created. That in combination with the declining price, caused the number of UTXOs in a loss to remain at [all-time high] since weeks.”
It indicates that many investors are “HODLing” throughout the bear trend, not capitulating amidst fears of a deeper short-term pullback.
Why are Bitcoin investors continuing to hold?
In the imminent future, there are no strong catalysts ahead that might trigger any short-term rally. In the upcoming year, however, events like the May 2020 block reward halving and the emergence of regulated cryptocurrency custodians could potentially serve as major factors to fuel Bitcoin’s momentum.
Hence, average hourly volume data from the crypto data platform Skew suggest that European investors are continuing to hold through the bear market with a long-term investment thesis in mind. According to Skew:
“European hours have been the most active in the last month. Here hourly volumes in UTC time for BitMEX’s XBTUSD contract Morning you get Asia + Europe and afternoon Europe + US. Will be hard to disrupt time zones!”
In recent weeks, Bitcoin has started to see more attention from high profile investors like billionaires Mark Cuban and Bill Pulte, demonstrating that even in a clear bear trend, the asset class is being actively discussed within the traditional finance sector.
Reasons to be cautious
For the long-term price trend of Bitcoin, it is important to evaluate the fundamentals such as hashrate, unique addresses, and transaction value in USD.
In the short-term, it is important to consider the volume, reaction of Bitcoin to lower time frames levels, and the possibility of miner capitulation.
Based on the improving hashrate of the Bitcoin network, Bitcoin is currently not at risk of miner capitulation.
However, if the Bitcoin price continues to correct below critical levels such as the $6,300 support, it could force miner capitulation to occur and push the cryptocurrency to even lower support levels.
Some technical analysts consider the possibility of Bitcoin falling to the $5,000s, depending on how the sentiment around bitcoin changes.
The $5,000 price point is also a level that could cause most of Bitfinex longs liquidated. Given that the market tends to follow the area with the highest amount of orders, it still remains a possibility. According to cryptocurrency investor Josh Rager:
“A lot of people are over-focusing on this chart and giving it way more credit than it needs Bitfinex from my understanding allows users to trade up to 3.3x leverage Meaning BTC price would have to move down to mid to low 5ks minimal to liquidate these longs.”