New Support Levels for Bitcoin at USD 20K as Demand Surges
The new demand at the USD 20,000 price point for Bitcoin (BTC)
appears to have forced the coins back into the hands of investors who care less
about price while creating a new realized price level.
In the latest
The Week OnChain Newsletter published on Monday, Glassnode’s UkuriaOC
pointed to "extreme demand" around the $20,000 region, noting that
each psychological price level from $40,000 to $30,000 to $20,000 creates a new
group of short-term holders (STHs).
The Glassnode
analyst noted that much of the supply of new STHs bought during that drawdown
has not been sold even though prices are significantly down. This may be due to
less price-sensitive buyers or those who care more about Bitcoin fundamentals
than investment gains, driving demand.
The BTC price
has fallen 55% from $40,000 to a low of about $18,100 between April and
June, according to CoinGecko.
This suggests
the newly-minted STHs are price-insensitive buyers with more confidence in
Bitcoin, adding that their conversion from an STH to a long-term holder (LTH),
who does not sell for at least 155 days, would help confirm this:
"It
would be constructive to see these STH held coins at the $40k-$50k level start
to mature to LTH status over the coming weeks, helping to bolster this
argument."
In this current
bear market, confirmed LTHs have locked in nearly 400 straight days of yearly
profitability, performing better than 30-day profitability.
This is
almost the same duration that LTHs experienced during the 2018 bear market.
Glassnode noted that this suggests losses are being locked in by LTHs, which means that the new buyers are less price
sensitive than those who sold. It is also an indication that the new buyers could become the newest group of
LTHs.
Another point
of note in the report is that "unprecedented forced selling" from
crypto companies amid mass liquidations and bankruptcies created conditions
ripe for a relief pump.
The report
concludes by stating that while the "worst of the capitulation may be
over," BTC could remain in this low range for some time as the cost basis
for new coin buyers has diverged below the realized price for only about 17
days straight. Previous bear cycles have endured low divergences of between 248
and 575 days.
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