For once, Bitcoin took a back seat in the crypto market last week in terms of attention — not that it would be glad about that, considering the circumstances. That’s not to say however that there weren’t talking points to be noted for the world’s most popular cryptocurrency in amongst the Terra terror that swept through the industry. A notable and unwelcome milestone was hit last week by Bitcoin, with the coin’s value falling below the $30k mark for the first time since the very last days of 2020. While BTC tends to lead the way in driving the market, it spent some rare time on the passenger side, being blown around by the winds that flung through crypto last week.
It’s been a long time since Bitcoin sat below its $30k benchmark. Trading comfortably around the $40k+ mark since the beginning of the year — with the exception of some notable events that drove it downwards towards the mid-$30k mark — BTC had become comfortable in its position and a steady bet for long term investors new to the market. Such was its demise last week however, there was barely time for Bitcoin to regain any market composure before it fell from $33k on Monday to $27k on Thursday. While driven by extenuating circumstances surrounding the unpegging of TerraUSD, the signs of a short term market confidence drain were certainly there for all to see, as traders panicked and subsequently drove prices downwards.
From a technical perspective, illiquid supply of Bitcoin and volumes on the BTC Exchange deteriorated rapidly amongst the panic. The Luna Foundation Guard had to remove more than 80,000 Bitcoin from its reserves — considering that the reported number of Bitcoin reserves on the LFG is now zero, this would have undoubtedly been a bearish incident, and certainly contributes to the decline of Bitcoin over the course of the week.
Nonetheless, towards the end of the week we noticed that illiquid supply levels actually bounced back over the weekend, to around the 14.53 million mark. We consider this to be a significant indication of long term market sentiment, and hopefully this is a sign of the special circumstances surrounding Terra being the key driver of the market dip, rather than a loss of confidence from traders towards the market as a whole.
There has been some kind of slight repair to the bottoming of Bitcoin last week too, however at the same time it’s difficult to be too optimistic in the short term. The effects of the Terra situation will reverberate for some time. With that said, if one coin is to be at the front of the charge back to normality, it will be Bitcoin.
Historically, the blue zones in the graph below have proved to be good ‘buy’ zones, and this may be something that traders take advantage of.
Long contracts on Bitfinex, a popular cryptocurrency exchange, exploded in the midst of the market downturn, to levels not seen since June 2021. The market appears keen to bottom-hunt, which would indicate some level of optimism towards Bitcoin bouncing back over the long term.
Needless to say, as selling pressure intensified, so did the balance of Bitcoin on Exchanges as observed below. This may prove to be an opportunity for traders looking to buy the dip, however for now the amount of Bitcoin available on exchanges continues to increase towards early 2022 levels.
Overall, while it is difficult to remain optimistic about the short-term potential of Bitcoin, we have observed some market behaviors that would point towards long-term sentiment towards BTC remaining positive. With that said, there is a lot for not just Bitcoin to recover from but the crypto market as a whole, and the next few weeks will be crucial in determining how the world’s most popular cryptocurrency will recover.
