After rallying to tap $20,350 on Tuesday, Bitcoin was again rejected below the $20,000 psychological level, plunging as low as $18,750 on Wednesday. Around two weeks ago, the top cryptocurrency was trading comfortably above $22,000 following a strong bounce from the $18,500 support in early September.
Notably, despite dropping by over 70% from its all-time highs, Bitcoin has exuded remarkable resilience above $18,000 amidst the increasingly volatile macroeconomic environment. A gradually hawkish Fed, geopolitical tensions, and the increasing prospects of a global recession, however, weaken the prospects of Bitcoin holding above this threshold.
“You can see you’re basically hugging a little bit of support right here…if the dollar continues to strengthen and the Fed seems to want to make sure that it does, then (it could) break this $18,000- $19,000 and your next stop is not really until that $12,000 to $13,000 level,” said Gareth Soloway, Chief Market Strategist of InTheMoneyStocks.
Key Metric Signal Possibly Turn Around?
Nevertheless, despite the bleak technical picture, a range of onchain metrics suggests that Bitcoin’s price is already in its darkest phase, raising the possibilities of a turnaround.
According to on-chain analysis firm Glassnode, despite the cryptocurrency’s rejection below the $20,000 level plunging Short-Term HODlers into severe unrealized loss, long HODLers remain steadfast, with reliable metrics “displaying a full cycle detox.”
In its weekly newsletter, the firm posits that the number of mature coins being spent onchain has collapsed from an exuberant 8% at the bull market’s peak in January to just 0.4% in September.
“As prices collapse back towards $20k in 2022, the market has responded with an opposite reaction, a sustained period of exceptionally low mature coin spending,” wrote Glassnode. “This suggests that the cohort of investors with older coins remain steadfast, refusing to spend and exit their position at any meaningful scale.”
According to the firm, almost all coins acquired above $30,000 were migrating from short-term hodler into Long term holder wallets which are “statistically unlikely to be spent in the face of further volatility.” Furthermore, it noted that the increased trading activities around current prices by short-term hodlers reflect both a recent capitulation and increasing demand within the current consolidation phase.
However, the firm warned that another capitulation was likely to be triggered by lacklustre demand on the Bitcoin network as well as increased coin churn by short-term hodlers along the current range as they jostle for the best entry price.
“A large supply airgap is apparent below $18k until the $11-12k range. Trading below the current cycle low would put an extraordinary volume of Short-Term Holder coins into a deep unrealized loss, which may exacerbate downside reflexivity, and trigger yet another wide-ranging capitulation event,” the firm added.
Recently, Bitcoin was trading at $19,350 on major exchanges after a 3.18% growth in the past 24 hours.