- Friday and Saturday saw massive losses on the crypto market as about 20% of capitalization was shed in the wake of shrinking Defi locked up values
- Despite the losses, long-term holders and speculators aren’t perturbed, and see this only as a temporary retracement
The weekend bulls for sure did not come out to play on this weekend, as a horrid slide on Friday, on a day when American stock markets also crashed, led to Bitcoin retreating all the way back to USD 10,500 from USD 12,000, and Ethereum also floundering around USD 400 from a high of USD 470.
Saturday did not bring any respite at all as Bitcoin continued to threaten USD 10,000 finally breaking it to a low of USD 9,875 (CoinDesk), while ETH took a nosedive even to USD 330 — all in the space of days, barely half a week after registering their respective yearly highs. It is indeed a huge change in situations since we posted the last weekly insight that provided a list of strong buy signals even as we approached USD 12,000 for Bitcoin.
Some joy should be gained from looking at the scale of this pullback, however. For example, at the time when that low for Bitcoin was hit, we see that BitMEX liquidations were well below USD 40 million. This is hardly the level of volume we’re used to seeing during a massive price move, as in the recent past, huge moves have seen USD 100 million contracts easily get wiped out on the world’s biggest futures platform.
So what do the figures suggest? We think it’s definite selling pressure on the spot market, once short term investors saw the moves by scalpers taking out positions above USD 11,000, the knee jerk reaction was to cut their losses and wait for the fall out to complete. It’s important to note also that USD 10,500 is a huge psychological resistance point that has proven to be the pain levels since 2017.
Noting that many new whales would have bought in 2018 and 2019, USD 12,000 is a hugely tempting level to take profit when you enter at USD 5,000 or thereabouts.
Add into that mix the very clear data that shows that Bitcoin miners themselves have been lining up to book in some profits, with on-chain data provider CryptoQuant sharing information gathered on mining pools. CEO Ki Young-Ju said:
“Miners send a certain amount of BTC to exchanges periodically, so they already have a large amount of BTC in the exchange. Whenever they decided to sell, it seems they move a relatively significant amount of BTCs to other wallets, and some of them are going to exchanges.”
— alejandro de la torre (@bitentrepreneur) September 5, 2020
Then again, not everyone agrees it’s all so clear cut. Poolin vice president Alejandro De La Torre himself has said that miner outflows won’t be as obvious, and many assumptions would have to be made to analyze their numbers. He outright denied that CryptoQuant does not even know Poolin wallets:
“I can reassure you that CryptoQuant does NOT know which wallets are owned by Poolin. perhaps it’s a handful of (big) miners they are tracking… even still, many assumptions.”
Looking now at Ethereum, for whom many were saying even this week that a potential second round of Flippening could be on the cards (where it might displace Bitcoin as the digital asset with the largest share in terms of market capitalization), ETH holders will be slightly deflated. ETH trader and influencer Byzantine General said this could mean a likely next target of even USD 290. He said:
“I’ve learned that this is an ‘ascending, right angled, broadening formation.’ Very typical after an uptrend, and a pretty neutral pattern: 55% of the times breaks out upwards. But man, 360 better hold or otherwise we go straight to 290, possibly 250.”
The good thing we would say here though is, all these strong points continue to remain true. The Winklevoss brothers, who said that Bitcoin was likely to hit USD 500,000 if governments would start including it in currency reserves, will certainly not be changing their minds even after this strong pullback. At the same time, data analytics company Ecoinometrics, who said 2020 would end at USD 41,000 (that’s just over twice as much as the current all-time high), will also be sticking to their guns.
Bitcoin maximalist Max Keiser, the host of RT, will point at Warren Buffett’s recent flirtations in Japan as a clear signal that even fiat stalwarts are beginning to exit US dollars and that will be the alert to welcome in new all-time highs for Bitcoin.
Finally, liquidity at the lows taken.
Reclaim of $10,000 would mean a S/R flip and a very probable chance we'll look for liquidity above the range highs.
That would suit a bounce towards $10,750-10,900 and majority of the markets bounce 25-40%. pic.twitter.com/Hjh5v1rdMT
— Michaël van de Poppe (@CryptoMichNL) September 5, 2020
The woes for Ethereum could also mean better news for Bitcoin, as Amsterdam Stock Exchange commentator and full-time trader Michael van de Poppe declared:
“Finally, liquidity at the lows taken. Reclaim of $10,000 would mean a S/R flip and a very probable chance we’ll look for liquidity above the range highs. That would suit a bounce towards $10,750-10,900 and majority of the markets bounce 25-40%.”
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