Bitcoin on sale? Or Bitcoin fire sale? Here's what to watch for
CoinList has always been the first place to buy the most promising new crypto assets through their token sales. Today, CoinList Pro is also the first place to trade them. Over the past 12 months, we’ve increased the performance of our crypto spot exchange CoinList Pro, rolled out support for dozens of new assets, and have crossed $1 billion in monthly trading volume.
Today, we are excited to announce that Mark Clerkin has joined CoinList as our new Head of Trading. Before joining CoinList, Mark spent nearly 10 years as a quantitative trader at Jump and HC technologies where he built market-making, taking, and algorithms for FX spot, futures, forwards, and swap markets. He also served as Vice President at High Alpha, a B2B SaaS venture studio and VC fund. At CoinList, Mark will be responsible for defining and executing a vision for our crypto trading platform and OTC business. Mark hit the ground running this week and joined me in answering some common questions we’ve seen from the community:
1. Is this the start of a bear market or just an appetizing dip for strong hands? Who is selling?
We are in a historically significant correction. Only time will tell just how significant. Market corrections are a part of a normal, healthy market. According to on-chain data, there are clear signs that short-term retail holders that recently entered the market are panic selling, while long-term holders are stepping in to buy the dip, their confidence largely undeterred. As in previous corrections, the prevailing narrative among Bitcoin HODLers is that “Bitcoin is on sale”. For many of these individuals, Bitcoin is an accumulation game for years to come. That said, a 40% correction may not have an easy fix, and it may take some time for the market to consolidate before bouncing back. Whether the $40K range is an attractive entry point for institutions remains to be seen.
2. Is the worst of the pullback over? What are some key indicators to watch for Bitcoin?
Time will tell, but here are three indicators that may shed some light on what Bitcoin does next:
- The relative strength index (RSI) — The RSI is a technical indicator widely used to gauge momentum and identify overbought and oversold conditions. Traditionally the RSI is considered overbought when above 70 and oversold when below 30. The 14-week RSI has now dropped to 53, a level that has historically marked an end of corrective pullbacks during the 2016-2017 bull run. The RSI moved above 53.00 in April 2019 and April 2020, kicking off major price rallies. Look for this number to stay above 50.
- Number of Bitcoin accumulation addresses — Bitcoin accumulation addresses are defined as those which have at least two incoming transactions but have never spent any coins. According to data from Glassnode, the total number of accumulation addresses continues to increase despite the price dip (see chart below).
- Long term holder net position change — This metric offered by Glassnode tracks the monthly net position change of long term holders, i.e. the 30-day change in supply held by long term holders. The data shows that long-term holders are buying the dip at an increasingly fast pace.
- Demand for stablecoins — As the markets experience downside volatility, the demand for stablecoins tends to increase as investors deploy stablecoins into yield bearing opportunities in DeFi. When exiting risk, users will always seek stable assets. The extent to which users will convert their idle assets into stablecoins will be a key metric to follow.
3. Exchanges saw the fastest Bitcoin inflows since Black Thursday this week. What does this mean for investors?
This can be interpreted as a sign of more retail traders looking to liquidate their holdings in a falling market. As described in the recent report from Glassnode, the majority of inflow came on Binance, a preferred venue for retail traders. Meanwhile, Coinbase, the preferred venue for US institutional accumulation, has seen almost entirely net outflows of BTC since breaking last cycle's $20k ATH, a trend that has continued this week. This could suggest that larger buyers remain active in BTC accumulation mode.
4. Why hasn’t there been any major new institutional buying of BTC after Elon Musk and Tesla?
The power of memes is incredible. As people like Elon flip-flop on which project to invest in or not, investors are left confused. Eventually, as the market matures, and an individual investor’s (e.g. Elon) impact on price will dissipate. For now, we are all subjected to celebrity-fueled price swings. With increased volatility, uncertainty from institutions, and tax season upon us, retail and institutional investors are taking profiles and being cautious. This has created an excellent buying opportunity for the next wave of investors who come to market.
5. Is alt season upon us? What does this mean for investors/traders?
There are multiple indicators that point to the arrival of altcoin season. According to onchain data, altcoin trading volume on major exchanges far exceeds BTC trading volume in the past couple weeks, and Ethereum has gained against Bitcoin with respect to the ETH-BTC trading pair. Competition among “ETH-killers” is fiercer than ever right now, with projects like Cardano, Polkadot, and Solana all showing great momentum. The crypto community has taken notice and we have seen massive inflows into these projects. Time will tell if Ethereum is able to withstand the coming onslaught while also giving Bitcoin a run for its dominance. Keep an eye out for an inflow of Ethereum investors in anticipation of the EIP-1559 update in July.
No matter what happens next, volatility — and opportunity — are likely here to stay. Prepare for the next market movements on CoinList.
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