In August 2023, the crypto market experienced significant fluctuations in its volatility. Over the last 48 hours, the market witnessed a massive liquidation of $1 billion, triggered by a series of bearish developments. The question arose: could this move signal the end of the prolonged consolidation period that had persisted for the past two months?
Is it the fresh start of a bullish market in the upcoming months, and what factors contributed to the recent market stabilization? Furthermore, does the influx of buyers aiming to capitalize on the market dip indicate a potential upward trend in the approaching months? Or is a more bearish rally waiting for the market? This research dives into the sentiment of the market for September following the substantial sell-off. These inquiries are explored through the lens of on-chain data and historical sentiment trends.
Analyzing The $1 Billion Liquidation
On Thursday, August 17, the crypto market experienced a severe downturn during the late hours of the U.S. trading session following news of SpaceX selling Bitcoin, Evergrande’s bankruptcy filing and interest fears. Both Bitcoin and Ethereum reached their lowest values at approximately $25,100 and $1,550, correspondingly.
As a result, the global market capitalization dropped below the $1 trillion mark, reaching a low of approximately $996.9 billion. However, a slight rebound was observed shortly thereafter following the SEC’s possibility of greenlighting Ethereum ETF.
As of writing, the total market liquidation has surpassed $67 million, while short positions are getting liquidated heavily, indicating that sellers are offloading their holdings. Since 17 August, the total liquidation surpassed $1.1 billion, affecting around 200K traders.
Stabilization In Bitcoin And Crypto Market: On-chain Sentiment
Netflow: After a substantial market sell-off, Bitcoin’s Netflow has dropped from 3,992 to -3,847. The Exchange Netflow is calculated as the difference between the inflow and outflow of BTC on exchanges. A negative netflow at present implies a period of selling for Bitcoin’s price.
NUPL Ratio: Bitcoin’s NUPL ratio (Net Unrealized Profit and Loss) declined from 0.29 to 0.22 after the BTC price broke below the $28.7K region. However, when we see a trend of decreasing values, it means that more people who own coins are experiencing losses.
This situation also suggests that there’s less motivation to sell these coins at a loss, which reduces the overall pressure to sell. Moreover, it shows that the total value of coins being used and sold is higher than their current market value, making it less appealing to sell them in the market.
This could be one explanation for the slowdown in the rapid decline of Bitcoin’s value. Some traders are actually holding onto their Bitcoin despite the drop in its price. Among a small group of traders, there seems to be a sentiment of holding onto their assets. It’s possible that they are using a strategy called Dollar Cost Averaging (DCA) to take advantage of a potential increase in value in the future.
Long-Term Holder SOPR: Interestingly, the long-term holder SOPR remained stable above level 1 despite the recent market decline. This suggests that long-term holders (>155 days) are still selling at a profit.
Long-term holders are often referred to as “strong hands” because they have weathered various market fluctuations and are more likely to hold through price dips. Their willingness to sell at a profit instead of panic-selling during a decline demonstrates their faith in the long-term potential of Bitcoin. This can help stabilize the market during hard times.
September’s Prediction For Bitcoin And Crypto Market
Over the course of history, September has consistently presented itself as a month with notable challenges in terms of Bitcoin’s price movement. Notably, this pattern corresponds with a similar trend observed in the overall crypto market, where September has frequently brought about challenges for the performance of crypto prices.
Focusing on September 1st in particular, the price of Bitcoin has demonstrated a consistent year-over-year price growth since 2017, with the exception of a single incident. From September 1, 2017, to September 1, 2018, Bitcoin surged 52% to around $7,190. The following year, it climbed 47% to $10,621 by September 1, 2019. September 1, 2020, to September 1, 2021, brought a massive 320% spike, peaking in 2021, with BTC hitting nearly $69,000. However, 2022 was harsh, witnessing a 60% drop from around $49,000 on September 1, 2021, to $19,800 on September 1, 2022.
With just about two weeks remaining until the close of August, Bitcoin is poised to register yet another year-over-year gain on September 1, 2023. If the leading cryptocurrency maintains its trading level of around $25,000 as the next month begins, its price will have grown by approximately 26% from September 1, 2022.
However, considering the earlier discussed historical trends, Bitcoin has exhibited an average year-over-year growth rate of approximately 74% since 2017’s September.
Taking Bitcoin’s value was approximately $19,800 on September 1, 2022, an average increase of roughly 74% would drive its price beyond $34,452 on September 1, 2023.
Following Bitcoin’s current sentiment and the ongoing buying momentum near the dip of $25K, we can expect a surge above immediate resistance levels as Bitcoin is currently undervalued, according to on-chain data. However, in the short term, traders should do their own research as the market is currently extremely volatile.
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