Bitcoin price drop might trigger accumulation again after investors sell 40,000 BTC in a week
|- Bitcoin price is seeing mild recovery amid US CPI rising by 3.1% YoY but remains under $42,000.
- The likelihood of accumulation is high right now, given that BTC is selling at a lower price ahead of spot ETF approval.
- This would serve as an opportunity for investors to restack their wallets after selling $1.6 billion worth of BTC in the past week.
Bitcoin price dropped over the past 24 hours, but investors were already exhibiting skepticism in the week preceding the event. Their selling, combined with whale selling on Monday, led to the short-term correction. However, BTC now has a chance at recovery since investors are once again in a position to buy back the sold BTC.
Bitcoin selling to turn into buying
The Bitcoin market noted the selling of about 40,000 BTC worth over $1.6 billion in the last week, bringing the exchange reserves up from 1.05 million BTC to 1.09 million BTC. Most of this selling came from retail investors, and whale addresses selling on Monday acted as the breaking point for Bitcoin price, resulting in the correction.
Bitcoin exchange reserve
While this is seemingly a bearish event, it opens up the cryptocurrency to the opportunity of recovering quicker and rising further. The reason behind this is the upcoming spot BTC ETF approval likely set to take place on January 10, 2024. The Securities & Exchange Commission (SEC) is expected to approve the 13 applications, which the market anticipates will kick off a bull run.
Thus, in order to make the most before then, investors will most probably attempt to accumulate again, and the on-chain metrics suggest that the present market conditions are the most apt for the same. The Market Value to Realized Value (MVRV) ratio is presently in the opportunity zone.
The MVRV ratio is an indicator that is used to assess the average profit/loss of investors who purchase an asset. The 30-day MVRV ratio measures the average profit/loss of investors who purchased an asset in the past month.
For Bitcoin, the 30-day MVRV sits at -3.79%, which indicates that investors who purchased BTC in the past month are sitting at a 3.79% loss on average. These investors are likely going to hold off on selling until they find a better price. At the same time, the presence of the indicator between -3% and -7.2% suggests that it is ideal for investors to accumulate. Hence, this area is termed an “opportunity zone”.
Bitcoin MVRV 30-day ratio
Accumulation at this point will not only help with Bitcoin price recovery but also see investors making gains over the next few weeks.
Bitcoin price steadies under $42,000
Bitcoin price, trading at $41,770 at the time of writing, has failed to breach the barrier marked at $42,069 on the 4-hour chart. While BTC is recovering from its short-term correction from Monday, it is having difficulty rising through the $42,000 mark.
Additionally, the US Consumer Price Index (CPI) data released earlier in the day shows that headline annual the inflation rate has fallen to 3.1% in November from 3.2% in October. Declining inflation is not a positive sign for riskier investments as they would not be the best bet against inflation.
This development is expected to keep BTC in the sub $41,000 range but above the $40,000 mark. If the $40,000 support is lost, then Bitcoin price might correct further to $38,000 and delay its recovery.
BTC/USD 4-hour chart
However, if investor bullishness pulls the Bitcoin price above $42,000, the bearish thesis would be invalidated, and BTC would be open to climbing back to $44,000.
Bitcoin, altcoins, stablecoins FAQs
What is Bitcoin?
Bitcoin is the largest cryptocurrency by market capitalization, a virtual currency designed to serve as money. This form of payment cannot be controlled by any one person, group, or entity, which eliminates the need for third-party participation during financial transactions.
What are altcoins?
Altcoins are any cryptocurrency apart from Bitcoin, but some also regard Ethereum as a non-altcoin because it is from these two cryptocurrencies that forking happens. If this is true, then Litecoin is the first altcoin, forked from the Bitcoin protocol and, therefore, an “improved” version of it.
What are stablecoins?
Stablecoins are cryptocurrencies designed to have a stable price, with their value backed by a reserve of the asset it represents. To achieve this, the value of any one stablecoin is pegged to a commodity or financial instrument, such as the US Dollar (USD), with its supply regulated by an algorithm or demand. The main goal of stablecoins is to provide an on/off-ramp for investors willing to trade and invest in cryptocurrencies. Stablecoins also allow investors to store value since cryptocurrencies, in general, are subject to volatility.
What is Bitcoin Dominance?
Bitcoin dominance is the ratio of Bitcoin's market capitalization to the total market capitalization of all cryptocurrencies combined. It provides a clear picture of Bitcoin’s interest among investors. A high BTC dominance typically happens before and during a bull run, in which investors resort to investing in relatively stable and high market capitalization cryptocurrency like Bitcoin. A drop in BTC dominance usually means that investors are moving their capital and/or profits to altcoins in a quest for higher returns, which usually triggers an explosion of altcoin rallies.
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