According to CryptoQuant CEO Ki Young Ju, Bitcoin whale inflows are decreasing. The drop in whale activity suggests high-net-worth investors are not currently selling large amounts of BTC. For decentralized finance (DeFi) tokens that have been underperforming, it could serve as a lifeline.
But according to Ki, fewer whales are seemingly selling BTC across major exchanges. In the near-term, that could lower the selling pressure on BTC. The executive said:
“Fortunately, whale inflows seem to be decreasing. It seems the $BTC price follows the traditional market lately. I think the only thing we can do with on-chain data at this moment is to watch whale moving. Most of the fundamental on-chain indicators are healthy.”
Other fundamental factors, including the Bitcoin blockchain network’s hashrate, show that the overall sentiment around the BTC market remains positive.
Bitcoin miners sold substantial amounts of BTC from July to August. The selling pressure from miners appears to have subsided in the past week, which could serve as another potential catalyst for recovery.
DeFi tokens show signs of recovery
Although the DeFi market remains down by 40% to 50% on average, major DeFi tokens are showing signs of stabilizing.
YFI appears to be repeating a similar accumulation phase as early September. At the time, BTC dropped to sub-$10,000, causing YFI to briefly drop below $20,000.
In the week that followed, YFI consolidated in the $20,000 to $23,000 range, eventually breaking out.
As long as Bitcoin avoids a drop below $10,000 as some technical analysts suggest, historical cycles show DeFi tokens are likely to rebound.
YFI, which has led the performance of other Y tokens and small-cap DeFi tokens, is defending a crucial support level with strength.
The Bitcoin (BTC) price faces numerous heavy resistance levels in the near term, whale clusters from Whalemap show.
The latest Bitcoin (BTC) whale clusters’ data shows four key short-term price levels could potentially act as resistances, namely $10,369, $10,570, $10,734 and $10,842.
The hourly map of unspent Bitcoin from whales. Source: Whalemap
Whalemap, an on-chain analysis firm that tracks Bitcoin whale activity, observes areas where whales, or high-net worth individuals, accumulate or move their holdings.
Green clusters indicate areas where whales last bought Bitcoin. Given the tendency of whales to wait until break even or in profit to sell, the clusters could act as resistance areas.
Bitcoin faces strong resistance above $10,400 in the near term
There are an abundance of whales who are at a loss or breakeven until BTC hits $10,842, clusters show. That also means that there is potentially a high number of whales that might sell in the near term.
The whale data also shows that some whales likely sold in the $10,900 to $11,100 range. The “HODLer” activity of whales indicates sell-offs at that resistance range, which is typically a bearish sign.
The researchers at Whalemap said HODLer activity has declined in the past two days, showing an uncertainty in direction. They explained:
“HODLer activity: Looks like they were quite active at the 10.9-11k prices. Not a good sign usually. But, we are quite clear so far for today and yesterday's HODLer bubbles also do not show much activity.”
The timing of BTC’s rejection from $11,100 matches the clusters and where whales began to sell. Bitcoin has also struggled to recover beyond $10,570, the second and the largest whale cluster in the short term.
Bitcoin has continued to see steep rejections since its steep drop from $11,179 to $10,296 on Sep. 21. The levels of $10,550, $10,450 and $10,370 have served as resistances in the last 48 hours.
The clusters and the sell-off of whales above $11,000 indicate BTC is likely to stagnate in the foreseeable future. The decreasing activity among whales also hints that a large spike in volatility is not expected.
The HODLer volume of Bitcoin whales. Source: Whalemap
Cryptocurrency traders are seemingly anticipating an extended period of consolidation, at least throughout September. Considering the intensity of the BTC drop within a short period, BTC would likely remain less volatile.
Traders echo a similar sentiment as whale activity
Edward Morra, a Bitcoin trader, said the BTC price trend remains bearish until it closes above $11,000. As the clusters show, BTC faces numerous heavy resistance levels on its way towards the $11,000 level.
The lackluster technicals of Bitcoin coincide with an unfavorable macro backdrop. In the near term, the weakness of gold, the stock market, and the rally of the U.S. dollar could amplify selling pressure on BTC. Morra said:
“Still bearish since September started, bullish either above $11k on daily or below in untested demand.”
Cantering Clark, a cryptocurrency technical analyst, said the $9,600 to $10,000 range could form a “bear trap.” The $9,600 remains an unclosed CME gap, which makes it a likely short-term target. He said:
“Think over the coming weeks we have a lot of ranging and consolidation to do. I do think that this 9.6-10k area is going to set up a nice bear trap at some point. Will be looking to swing SOS for that.”
Decentralized finance (DeFi) tokens, including Uniswap (UNI) and Synthetix Network (SNX) are recovering with the lead of Yearn.finance (YFI). Following brutal 40% to 50% corrections across the market, the DeFi space is taking a breather.
With YFI’s lead, other DeFi tokens recorded 10% to 20% gains in the last 12 hours.
UNI, in particular, rose by nearly 20% within a four-hour span, the spot market stabilized and futures contracts neutralized.
On-chain indicators show that DeFi tokens, especially YFI, are heavily oversold. According to the pseudonymous trader known as “Byzantine General,” YFI has nevern been this oversold since its Binance listing on August 11.
YFI has climbed from $5,010 to over $43,000 within 33 days since the listing on Binance. The recent YFI pullback marks the asset’s steepest fall to date.
But after a 50% drop, on-chain indicators show YFI is massively oversold. The trader explained, “YFI hasn’t been this oversold since it got listed on Binance.”
Due to the sheer intensity of the rally of DeFi tokens, a pullback was widely expected. The magnitude of the recent correction surprised many traders, but it was necessary to neutralize the markets.
The correction also coincided with the end of a minor DeFi cycle. Primitive Crypto founding partner Dovey Wan explained:
“UNI airdrop is the last drop of the unsustainable money printing in Defi world. Others were simply selling unrealistic story of Uni killer for an over-expected token price via noobs market buy. When Uni slayed them, it’s when all are back to the natural process of hype cycle.”
As such, a pullback at the time DeFi tokens plunged was healthy, as long as another major drop does not occur. As an example, YFI has stayed above the key $20,000 support level convincingly, and that could be critical in supplementing the next rally.
Prior to the drop, a cryptocurrency trader known as “Flood” suggested an ETH drop below $350 would cause another 20% drop for DeFi tokens. The DeFi market is coming off a large drop within a short period, raising the probability of a strong recovery.
The on-chain market data provider Santiment reported that the fundamentals of Ethereum also remain strong. For DeFi tokens, the resilience of Ethereum would provide a favorable backdrop for recovery.
The researchers at Santiment found that non-exchange addresses on Ethereum are not slowing down. They said:
“The top 100 Ethereum non-exchange addresses are not slowing down one bit on their accumulation. Santiment data indicates these whales now hold 26.22M ETH combined, a +20.61% increase in cumulative holdings, compared to 21.74M held 2 months ago.”
The data shows that both ETH and DeFi tokens are seemingly recovering simultaneously, backed by oversold indicators and growing user activity.
The price of Bitcoin rejected the $11,100 resistance level with a steep 6% drop. Analysts tell Cointelegraph what will likely happen next.
The price of Bitcoin (BTC) brutally rejected the $11,100–$11,300 resistance range with a 6% drop. Following the steep pullback, analysts remain cautiously optimistic toward BTC and the rest of the cryptocurrency market.
Analysts have generally attributed the short-term fall of Bitcoin to the uncertainty around the COVID-19 pandemic. On Sept. 21, the Dow Jones Industrial Average fell by over 800 points at the day’s lowest point. Bitcoin, gold and other risk-on assets fell in tandem, causing a sell-off across most asset classes.
The recent pullback was similar to the market crash in March wherein the majority of assets dropped altogether. Hence, analysts say that some progress in the development of vaccines or a new stimulus package could rejuvenate market sentiment.
The bullish case for Bitcoin
Speaking to Cointelegraph, John Todaro, head of research at TradeBlock — an institutional trading platform — said the near-term performance of BTC is conditional. Todaro believes investors are increasingly positioning for “more risk-off” assets due to a contentious election, lacking stimulus and rising COVID-19 cases. If the three factors continue to worsen, then Bitcoin will likely see a larger pullback.
But the price of Bitcoin could also recover in the short term if there are improvements in any of the three factors. For instance, if a stimulus bill is approved, it would immediately cause stock market sentiment to rapidly improve and, in turn, cause a BTC rebound. Todaro noted:
“Over the past few weeks we have seen declining equities with investors positioning more risk-off given the lack of continued stimulus for businesses, political instability associated with a likely contentious election, and the risk of rising COVID-19 cases in the fall and winter… if those three risks previously mentioned rise, then we will see a further correction; however, if there is progress towards COVID-19 vaccine/treatment, and more fiscal stimulus then this correction will likely have been the worst of it for some time.”
The current market dynamics of Bitcoin are significantly different from previous cycles because they are dependent on the traditional financial market. The overall sentiment of investors across various asset classes is moving simultaneously due to the pandemic’s economic effect. Strategists are unsure whether the recent resurgence of COVID-19 cases could cause additional restrictions and lockdowns in Europe and in the United States, but Wall Street is bracing for another potential downturn. Sam Stovall, chief market strategist of CFRA, told CNBC: “Things had to have changed for investors to be so nervous.”
The short-term bull case for Bitcoin would be a swift retest of the $11,100 resistance level. Bitcoin has tested the resistance area only once since its correction on Sept. 2. The resistance level will weaken if BTC continues to wear it down with repeated retests. For that to happen, the overall investor sentiment across various markets, including gold and stocks, has to improve.
Bitcoin has one potential catalyst that could ignite a rally despite the weakness of the traditional markets. In the past several days, decentralized finance tokens have plummeted in value. As Cointelegraph reported, even DeFi giant Yearn.finance’s YFI token and Uniswap’s UNI fell by 46% and 48%, respectively, within a week. The drop occurred as BTC rallied from $10,300 to $11,100, leading analysts to think the take-profit pullback of DeFi tokens is buoying the buying demand for BTC.
The cycling of profits from DeFi tokens to Bitcoin does not necessarily mean the market is rebounding. But Todaro noted that investors might be moving their funds to more reliable and stable assets, like Bitcoin. If the trend continues, there is a chance BTC sees another take-profit rally while the DeFi market corrects. Todaro explained:
“Capital exited lower market cap alts and Ether to a greater extent than bitcoin. I do not think this necessarily indicates a rebound in the markets but rather a greater flight out of higher beta tokens than in bitcoin, which has been more stable.”
Bitcoin decoupling from U.S. stocks?
Denis Vinokourov, head of research at crypto brokerage and exchange firm Bequant, told Cointelegraph that political factors and the pandemic fueled BTC’s recent drop. He pinpointed the passing of U.S. Supreme Court Justice Ruth Bader Ginsburg as a key factor. He clarified that the level of uncertainty in the U.S. markets heading into the election was already high, but now investors are even more uneased:
“Digital assets fell sharply across the board, in tandem with equity markets and even safe haven assets such as gold, as concerns over the upcoming US elections took a dramatic turn. The aforementioned unease and uncertainty stems largely from the passing of the Supreme Court Justice Ruth Bader Ginsburg which, without a prompt replacement will lead to a 4-4 deadlock in the country’s highest court.”
But Vinokourov emphasized that Bitcoin and Ether (ETH) could rebound strongly due to their “solid network fundamentals.” The correlation between the U.S. stock market and BTC could be short-lived, given that the markets slumped unexpectedly within a short period of time, with unprecedented intensity.
The fundamentals of Bitcoin have strengthened in recent weeks, especially as the blockchain network’s hash rate reached an all-time high. The timing of the upsurge of the hash rate is noteworthy because it comes less than four months after the last block reward halving. Following a block reward halving, the hash rate tends to drop because the amount of BTC mined decreases. The continuous increase in the hash rate indicates miners expect a higher BTC price in the medium term.
Not only has the hash rate recovered to pre-halving levels, it has exceeded the previous high to reach a new all-time high, and Vinokourov expects a rebound to occur shortly because of strong network fundamentals: “Looking at the playbook following the covid-19 related sell off in March, which also spilled over into digital assets, markets tend to decouple.”
What do traders think about BTC?
In the near term, traders anticipate BTC to range between the weekly low at $10,200 and the $10,600 resistance level. A pseudonymous trader known as “Salsa Tekila” said a “choppy” range in the near term is most likely. He stated:
“Wouldn’t be surprised we bart down, swing the weekly low, chop back up another day or two... $BTC looks choppy, keeping my trades private; I’ll flip flop all day probably. Don’t think we’re ready for a big one, maybe 10.2k – 10.6k range till Thursday unless catalyst.”
Some traders such as Cantering Clark believe that BTC is primed for a relief rally. Similar to the stock market, BTC saw an intense pullback in a short period, which typically results in a short-term recovery. The futures and options markets tend to neutralize after a big price movement, leading BTC to recover with low volatility. The trader noted:
“$BTC likely sees relief in the near future. Nice selling into the close of yesterday’s session. If you ask me, that looks like an optimal way to set up a trap for any systematic shorts that would get the green light at that point.”
Uniswap’s native governance token UNI saw a similarly explosive upsurge in a significantly shorter period.
As Cointelegraph reported, Uniswap airdropped 400 UNI tokens to every user that used the Uniswap decentralized exchange before Sept. 1. At its peak at around $8.80, the 400 UNI tokens were worth $3,520.
UNI saw a massive price spike in a short period because of multiple major exchange listings. Within the first five hours of launching, Coinbase Pro, Binance, and FTX listed UNI. As a result, the price of the token surged from $0.30 to $8.80 in less than five days.
Due to the massive gains of DeFi tokens in their USDT and BTC pairs, a profit taking correction was widely anticipated but the intensity of this correction has many traders surprised.
Ether struggles to sustain momentum
Historically, Ether has led the rallies among altcoins, including DeFi tokens. In some bull cycles, Ether also front ran BTC price. For example, from March to August, as Bitcoin price recovered from the infamous Black Thursday crash, Ether price strongly outperformed BTC.
However, Since Sept. 1, Ether has struggled to match the performance of Bitcoin. While BTC rallied from $10,300 to $11,100, Ether remained pinned below $400.
In the past 20 days, Ether price declined by around 28% and in the same period, BTC recorded a 12% drop against the U.S. dollar.
Ether’s short term weakness was likely caused by the increased selling pressure on DeFi tokens, hence the nearly 50% correction from the likes of UNI and YFI over the past few days.
Bitcoin profit taking kickstarted the DeFi correction
The sentiment around BTC’s rally from Sept. 9 to Sept. 19 remains mixed. Interestingly, BTC alone saw a strong upsurge, while Ether, altcoins and the majority of DeFi tokens remained stagnant. This is somewhat atypical as usually when Bitcoin is range bound, altcoins rally, and when Bitcoin rallies moderately altcoins may lag but still tend to follow BTC’s bullish price action.
This short term inverse correlation between BTC and altcoins suggests that BTC saw a take-profit rally as investors cycled profits from DeFi tokens to BTC.
Ethereum price corrected 16% in 4 days, led by these three key factors.
The crypto market saw a significant correction today and Ether (ETH) price did not escape the carnage. In the last 24 hours, the top altcoin recorded a 12% drop as the price fell to $331. In the same period, Bitcoin (BTC) price slipped by 6.3% to find support near $10,300.
Ether’s decline comes after a head and shoulders pattern became clear on the daily timeframe and the price slid into a shart downtrend over the past four day.
Three reasons are likely behind Ether’s poor performance: a technical rejection, a slight deflation of the Decentralized Finance (DeFi) bull run and weakening momentum.
Several analysts expected Ether to correct
When Ether’s weekly candle opened on Sept. 21 a few technical analysts suggested the likelihood of a bearish retest.
A pseudonymous trader known as “Cred” said Ether might retest the $390 level before seeing a potential pullback. He explained:
“Weekly time frame still looking like a bearish retest of the previous range ($390s). Bitcoin is looking better on the weekly, but also pulling back from daily resistance.”
Since then, Ether’s price declined from $372 to as low as $331 across major cryptocurrency exchanges.
Michael van de Poppe, a Cointelegraph contributor and full-time trader at the Amsterdam Stock Exchange, raised a similar point. Van de Poppe emphasized that the $385 to $395 resistance range signalled that a strong rejection could be on the cards.
Eventually, the rejection of a key multi-year resistance area led the selling pressure on Ether to intensify.
Van de Poppe said:
“The $385-395 level says; no Bueno. Continued range-bound movements. If we get to $280 and/or $250, I'd be happily looking for longs.”
Ether was already facing a clear rejection at a key resistance level before Bitcoin even started to pull back sharply. It appears that Bitcoin’s rejection at $11K simply amplified the near-term downturn of Ether.
DeFi correction placed additional pressure on Ether
In the past three months the Ethereum network has thrived as user activity skyrocketed and various on-chain metrics demonstrated significant demand for Ether.
The explosive growth of the DeFi sector led to overwhelming demand on the Ethereum blockchain network to the point where it started to clog and transaction fees exploded to new highs.
Data from Cryptofees.net shows that Ethereum is processing around $3.77 million in daily fees to miners. In comparison, Bitcoin has been settled around $369,000 in daily fees on average in recent weeks.
Much of the optimistic sentiment around Ethereum revolved around the fast growth of the DeFi space. Hence, when DeFi tokens crashed, it likely placed additional selling pressure on Ether.
On average, DeFi tokens recorded a 40% drop over the past week. Even DeFi giants, like Yearn.finance (YFI), dropped by 46% within the last ten days.
Weakening market momentum
Even before the Bitcoin price drop, Ether was noticeably lagging behind BTC. The price continued to stagnate throughout the past two weeks, while BTC managed to rally from $10,300 to $11,100.
From its yearly peak, the price of Bitcoin is down by around 16%. In contrast, Ether has fallen from more than 30% from $488.95 to $342.
Despite this, over the long term, on-chain analysts remain generally optimistic about the trend of Ether and the Ethereum network.
Increasing number of Ethereum weekly active users. Source: CryptoQuant
Ki-Young Ju, the CEO of on-chat data platform CryptoQuant, said the number of weekly Ethereum active users is rising. This data underlies the continuous increase in demand for DeFi platforms and shows that the fundamentals of the network are strengthening.
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Bitcoin has not seen three positive consecutive quarters since 2017, historical data shows.
According to the latest data from Skew, Bitcoin (BTC) has not seen three positive consecutive quarters since 2017. If BTC ends Q4 with a net gain, it would be three consecutive winning quarters for the first time in three years.
Q4 has been mostly bearish for Bitcoin since 2018
But historical data is not in Bitcoin’s favor as the last two Q4s closed with 42.54% and 13.6% drops, in 2018 and 2019, respectively.
The historical quarterly returns of Bitcoin. Source: Skew.com
Analysts attributed that historic rally to two major factors. First, BTC saw a massive mainstream frenzy across major markets including the U.S. and South Korea. Second, BTC came off a block reward halving in July 2016, a generally bullish milestone event for the network.
A block reward halving has a positive impact on the price of BTC because it has a direct effect on its newly issued supply. A halving decreases the rate at which new BTC is created by half, causing the circulating supply to drop over time.
However, since 2018, Bitcoin has underperformed during the fourth quarter. The subpar performance could be cyclical for various reasons. Investors in the U.S. could sell BTC for clarity on year-end taxation and holders in Asia might sell ahead of the new year.
But two factors could potentially boost the bullish case for BTC by the year’s end: gold’s rally and the dollar’s weakness.
Strategists at the Swiss investment banking giant UBS expects gold to continuously rally throughout 2021. The prediction coincides with the fundamental weakness of the dollar against other reserve currencies.
What traders expect in the near term
In the near term, traders are becoming more cautious about the price trend of BTC, particularly as the U.S. dollar is starting to find some footing in the run up to the U.S. election.
Meanwhile, technical analysts are closely observing two important technical levels at $10,500 and $10,000 for the price of Bitcoin. As Cointelegraph reported, losing the $10,000 support area could lead to a major pullback. The movement of whales indicates that the $9,800 support region has weakened, which might cause a bigger correction.
Since September 12, the price of Yearn.finance (YFI) dropped from $43,937 to as low as $26,222. YFI’s 40% decline within eight days caused other Y tokens and decentralized finance (DeFi) tokens to plummet.
DFI.Money (YFII), YFLink (YFL), YFValue (YFV), and other Y tokens dropped harder than YFI in the past two weeks.
DeFi market is taking a breather, what happens next to Yearn.finance?
The DeFi market is consolidating after months of seeing an explosive rally.
“YFI is also included in the list of assets I watch, so I’ll periodically review Price Action. The analysis is quite simple, we’re consolidating here and continue to rise or fall to $20k.”
The $31,525 area was especially critical for YFI as it marked the 20-day moving average of the 1-day chart. Losing an MA on a high-time frame chart is considered short-term bearish in technical analysis.
When asked about the longevity of “bluechip” DeFi tokens, Kelvin Koh at Spartan Group said it depends on three factors.
Koh, who operates a major Asia-based investment firm, pinpointed the mainstream users inflow, regulation, and market sentiment as key catalysts. He said:
“It depends on whether: 1. we get bubble conditions like in 2017; 2. DeFi can continue to innovate and build real products and bring in mainstream users; 3. Any regulatory headwinds. Given the subset of projects ATM, YFI would be considered a blue chip.”
YFI faces a larely technical pullback in the near term. But in the longer term, the pace of innovation and product launches of Yearn.finance remain optimistic.
Andre Cronje, the creator of YFI and the project’s lead developer, has continued to ship developments at a rapid rate.
For instance, Yearn.finance released the SyntheticRebaseDollar on September 17 as its latest product. It enables users to deposit a cryptocurrency, like Chainlink, that tracks its dollar value. The Yearn.finance team explained:
“Deposit $100 worth of LINK and you receive 100 srUSD. If the value of LINK increases by +50%, you will have 150 srUSD. There is no rebase trigger, this happens automatically every time the value of underlying collateral changes.”
The continuous introduction of new products and services on Yearn.finance would likely strengthen its survivability over the long run.
A whale accumulated around $1.3 million worth of YFI
On September 20, despite the sizable pullback of YFI, an unknown whale placed a 49 YFI buy order on Binance at $32,000.
The buy wall was eventually absorbed, and the whale purchased around $1.3 million worth of YFI.
49 #YFI (1,342,456 USD) transferred from #Binance to unknown wallet
Bitcoin miners sold substantial amounts of Bitcoin throughout the past two months, but on-chain analysts believe it won’t stop the next bull run.
Historical data shows that some miners began to sell Bitcoin (BTC) at the end of July, leading to increased selling pressure in the cryptocurrency market.
Eventually, the dominant cryptocurrency fell steeply from mid-August, recording a 13% fall and since then BTC has struggled to retake the $12K mark.
Bitcoin selling by miners from 2017-2020. Source: CryptoQuant
According to CryptoQuant CEO Ki Young Ju, continued selling by miners might not be enough to prevent a bull run. On-chain data analysis firms closely observe the movements of miners and whales because they hold significant amounts of BTC.
Willy Woo, an on-chain analyst, explained that miners represent one of the two external sources of selling pressure for Bitcoin. He previously said:
“There’s only two unmatched sell pressures on the market. (1) Miners who dilute the supply and sell onto the market, this is the hidden tax via monetary inflation. And (2) the exchanges who tax the traders and sell onto the market.”
When miners start selling their Bitcoin holdings, typically to cover expenses, it could trigger a correction in the cryptocurrency market.
For instance, From Aug. 17 to Sept. 5, the price of Bitcoin dropped from $12,486 to $9,813. During that time, several whales sold Bitcoin right at $12,000 and the same behaviour was observed amongst miners.
The selling pressure coming from miners and whales noticeably has been attributed to the current crypto market slump but in the longer term, Ki explained it is not enough to stop a prolonged bull run.
If miners abruptly sell a significant amount of BTC, it could cause a severe correction as a small price movement could trigger liquidations from heavily-leveraged traders. Hence, even a relatively small sell-off by miners could theoretically cause massive price swings.
Ki says the intensity of the sell-off from miners was not strong enough to halt future bull runs. He said:
“Miner Update: Some miners began selling at the end of July, but I think in the long-run, miners didn't sell BTC large enough to stop the next bull-run.”
According to ByteTree, the net inventory of Bitcoin miners declined by 125 BTC per week in the last 12 weeks. The data indicates that miners sold approximately $1.362 million BTC per week week atop the BTC that they mined and sold.
Amount of BTC mined and sold in the last 12 weeks. Source: ByteTree
As Ki emphasized, the data shows that miners sold substantial amounts of BTC, but not in amounts that were irregular to normal behaviour.
Post-halving bull cycle remains a possibility
Bitcoin is still hovering above the critical $10,000 technical support level despite multiple attempts by bears to drop the price below the key level.
The resilience of Bitcoin amidst a heightened level of selling pressure suggests a cautiously bullish trend in the long term.
The Bitcoin short-term holder NUPL. Source: Glassnode
Several on-chain metrics also indicate that now is a healthy accumulation phase for Bitcoin. Rafael Schultze-Kraft, the CTO at Glassnode, said:
“Short-Term Holder Net Unrealized Profit/Loss (STH-NUPL) with a #bullish signal here imo. That bounce of the 0-line was important, is very characteristic for previous bull markets, and historically a good buying opportunity.”
Bitcoin addresses holding 1 BTC plunged to a 4-month low, but it is premature to suggest it is a bearish sign.
The number of Bitcoin (BTC) addresses holding 1 BTC plummeted to a four-month low on Sep. 20, according to the data from Glassnode. But it is premature to suggest that it is a bearish sign for the top cryptocurrency.
What caused the number of small Bitcoin addresses to sharply drop?
The noticeable decline in small Bitcoin addresses coincides with the explosive expansion of the decentralized finance (DeFi) market.
Since Aug. 1, the total value locked in DeFi protocols on Ethereum rose from $4.091 billion to $9.77 billion. The massive increase of capital in DeFi caused the demand for tokens like Wrapped Bitcoin (wBTC) to surge.
The total value locked in DeFi. Source: Defipulse.com
Users primarily utilize DeFi protocols to earn yield with their cryptocurrency holdings. Since it is not possible to transfer Bitcoin to Ethereum, users convert BTC to wBTC, and then use wBTC on DeFi platforms.
Using wBTC to gain exposure to DeFi platforms and yield allows Bitcoin holders to achieve two things. First, BTC users can still utilize DeFi protocols without selling BTC. Second, Bitcoin investors do not lose the potential upside from BTC’s price movements.
The number of small Bitcoin addresses holding 1 BTC likely dropped as the demand for wBTC increased. Users might have converted their BTC to wBTC, as the popularity of DeFi rose.
In July, Jack Purdy, a researcher at Messari said the dominance of wBTC would likely continue over the short to medium term. He said:
“For these reasons, wBTC is poised to continue its dominance in the short to medium term. That being said, there’s still the looming threat of government intervention once these assets grow large enough to catch the regulator’s attention.”
But the decline in small addresses and the upsurge of wBTC do not necessarily hint at a bearish trend for Bitcoin.
Eventually, when users decide to pull their wBTC out of DeFi protocols, they would convert them back to BTC. If the addresses moved BTC to Ethereum’s wBTC, it does not indicate that the users sold BTC.
Instead, it suggests that it might be a short-term trend that might last until the end of the ongoing DeFi cycle.
wBTC is accelerating to $1 billion
On Sep. 18, Skew reported that the value of wBTC is accelerating towards $1 billion. According to data from CoinMarketCap, 76,047 wBTC are currently in circulation suggesting more users are transferring BTC to Ethereum-based DeFi platforms for yield.
Since wBTC represents the exact value of 1 BTC, it is not a bearish trend for Bitcoin over the longer term. In fact, one could argue it is a positive metric because users are reluctant towards missing out on potential BTC upside.
While DeFi platforms allowing users to gain yield using wBTC are profitable, there exist high-risk and high-return pools. The rising market capitalization of wBTC suggests many users do not want to risk losing out on a potential BTC rally.
According to CryptoQuant’s Ki Young Ju, fewer whales have been sending BTC to exchanges. Historically, the data indicates less selling pressure from high-net-worth Bitcoin holders.
Simultaneously, the daily volume of Bakkt’s institution-focused Bitcoin futures market achieved a record high. Operated by ICE, the parent company of the New York Stock Exchange (NYSE), Bakkt facilitates BTC trades for institutions.
The Bitcoin whale activity and Bakkt’s record volume suggest that both whales and institutions could be accumulating BTC.
Bitcoin continues to retest $11,000 as market data hint at an optimistic trend
Whales and institutions have an immense impact on the Bitcoin price because of the sizes of their trades.
One whale that sold Bitcoin at over $12,000 after holding it for two years had around 9,000 BTC. At the current market price of BTC at $11,070 that is nearly $100 million USD.
Considering the reduced risk of large sell orders, the declining appetite of whales to sell BTC is a positive factor. Ki said:
“Exchange Whale Ratio hits the year low—the fewer whales moving to exchanges, the less dumping, and makes the higher BTC price.”
The data CryptoQuant is referring to is a broad reserve of Bitcoin holdings of whales on exchanges. There are some whales that are selling at the current prices, as Cointelegraph previously reported. But the data shows that the majority of whales prefer not to sell at $11,000.
The optimistic activity of whales coincides with a clear spike in institutional demand for Bitcoin on Bakkt.
Bitcoin whale activity on exchanges. Source: CryptoQuant
According to Arcane Research and Skew, Bakkt reached a new all-time high daily volume on Sep. 15., the majority of which was physically-settled. It comes merely 24 hours after MicroStrategy purchased an additional $175 million worth of BTC.
The timing of the Bakkt’s Bitcoin futures market volume upsurge is worth noting because it closely follows MicroStrategy’s bulk purchase.
The historical volume of Bakkt Bitcoin Futures. Source: Skew
Based on the data, an argument could be made that some institutions are possibly acquiring BTC after MicroStrategy’s high-profile investment, particularly as some popular pricing models suggest undervaluation at current levels. Analysts at Arcane Research wrote:
“Another day, another all-time high on Bakkt with upwards trend After a new ATH daily volume on Tuesday, yesterday's volume pushed even higher on the institutional-focused Bitcoin futures platform.”
Four days after Bakkt saw a record volume and the whale activity on exchanges declined, BTC rose from $10,800 to $11,100.
What is next in the near term?
Some traders say that atop the accumulation from institutions and whales, a profit-taking rally might be taking place.
In recent months, the decentralized finance (DeFi) market outperformed major cryptocurrencies, like Bitcoin and Ether (ETH). Following the strong performances of DeFi tokens, investors might be cycling the profits back to BTC and stablecoins.
“Sold all ETH and alts over the last week. Rotated into BTC and fiat. Almost everyone is criminally underexposed to Bitcoin and just as criminally overexposed to DeFi. When everyone is on one side of the ship.”
If the ongoing trend continues, DeFi tokens could continue to underperform against BTC in the near term. At least in the foreseeable future, that could strengthen the upsurge of BTC, whose dominance index has slumped to yearly lows in recent months.
UNI, which launched less than 48 hours ago, has rallied from around $1.00 to $8.00 in a short period. After an impressive eight-fold gain, the token started to pull back but trading volume suggests traders have their eyes set on higher prices.
Traders, the majority of which were at FTX exchange, were heavily shorting UNI in anticipation of a strong pullback. These traders might have thought that most holders of the 400 UNI tokens UniSwap airdropped to its users would want to cash in after their value reached $2,640.
The exact opposite occurred as within 5 hours of launching, Binance, Coinbase Pro, and FTX all listed UNI. This marked the fastest listing among the top three exchanges for a newly-launched token and has led some crypto pundits to question whether exchanges are violating their own listing policies in pursuit of quick profits.
The swift listing by these exchanges caused the demand for UNI to soar and the negative funding rate on FTX further fueled the rally as short contract holders were pushed out of their positions.
Eventually, the token topped out at around $8.60 on Binance and was followed by a 22% correction where the price consolidated in the $6.50 range before moving back to $7.00. As this occurred, the price of YFI surged by 10.72% from $31,158 to $34,509.
Ether also rose slightly by more than 1% immediately after the price of UNI declined.
Hsaka, a popular crypto-analyst on Twitter pointed out what he calls an inverse correlation between UNI and major DeFi tokens like YFI. According to him, this shows that many DeFi users were trading UNI but as soon as UNI topped out, the profits cycled back into top DeFi tokens, with YFI being the primary beneficiary.
Top traders views on the UNI rally and sharp correction
While the sudden upsurge of UNI surprised many investors, some traders expected the governance token to rally.
A pseudonymous analyst known as “DC Investor” said that as the most used app on Ethereum, UNI’s strong performance was not a surprise. He said:
“Can't comment much on near-term price. But I guess I'm just surprised that people are surprised by UNI raging. Most used app, fees greater than Bitcoin, does volume bigger than many CEXes, and one of the best demos of Ethereum. Learn to see & buy the real ones.”
Another popular crypto-Twitter trader known as “Crypto Medici” said UNI is still likely undervalued and over the long term, he expects a $3 to $5 billion valuation. The trader noted:
“UNI going to be worth $3-5 billion (conservative) Still extremely undervalued. Token distribution was genius and many that sold will FOMO back in when we break $1 billion. This is before V3 comes out, and liquidity mining ramps up.”
Binance Coin (BNB), the native token of Binance Chain and Binance Smart Chain (BSC), surged by 55% in 13 days. Some high-profile investors anticipated the strong performance of BNB following the release of BSC.
On September 12, Kelvin Koh at the Asia-based cryptocurrency investment firm Spartan Group, said BNB would likely rally due to staking.
With the launch of Binance Smart Chain and the launch pool, it became possible for users to stake Binance Coin on Binance. That enables users to earn yield, similar to yield farming on Ethereum-based DeFi platforms.
Staking and Binance Smart Chain Causes Binance Coin (BNB) Demand to Spike
In recent months, the DeFi craze has led Ethereum and Uniswap activity to surge. Users are staking various assets like Ethereum (ETH) and Wrapped Bitcoin to earn yield on DeFi platforms.
Consequently, the total value locked in Ethereum-based DeFi protocols surged from $1.88 billion on July 1 to $9.1 billion on September 18.
“For the past 8 months, $BNB has been a really boring asset. That changed with launch pool. Imagine holding an asset that can consistently generate a high yield simply by staking it on Binance. No need to worry about SC risk, anon founders, metamask or yield farming strategies.”
BNB has struggled to record a major rally throughout the first half of 2020. Subsequent to the release of Binance Smart Chain and the launch pool, Koh said he anticipates the demand to rise.
Emphasizing on the constant demand for Binance Coin the launch pool and DeFi growth creates, Koh added:
“As the DeFi boom makes its way into the mainstream media, it will draw new comers into crypto who will likely probably participate in yield farming this way. For $BNB, this creates a constant demand for holding/staking the token making it an attractive asset to own. Meanwhile fees that accrue from the exchange continue to burn existing supply. I expect $BNB to claw back the underperformance YTD as a result.”
Binance Smart Chain Transaction Volume Grows
Atop the rising demand for Binance Coin, the Binance Smart Chain transaction volume is also rapidly surging.
“BSC transaction volume is now 26% of ETH. Did a quarter of users move already? or is this just demand that was curbed due to high fees? Looks like the later as ETH tx count didn’t drop much. Growing, not taking, the pie.”
Whether Binance Smart Chain would be able to compete against major blockchain networks in the DeFi space over the long run remains uncertain.
UBS, a top-two investment bank in Switzerland after Credit Suisse, has a bullish outlook on gold. In the medium term, the improving sentiment around the precious metal could buoy the bull case of Bitcoin (BTC).
Many high-net-worth investors within the cryptocurrency space describe Bitcoin as gold 2.0. Billionaire investors the Winklevoss twins have consistently said they believe BTC is a better store of value than gold.
Gold has increased by 29% year-to-date, and a prediction of a 7.5% rally for an asset like gold is a bullish projection. Guan said:
“We are very bullish on gold. We think that the prices will go higher and what is interesting is we think it will stay higher for longer than expected.”
Atop its technical momentum, Guan noted that gold is becoming an “attractive portfolio diversifier.” It has historically acted as a robust safe-haven asset, but its increasing price in recent months has made it more compelling.
The risk of inflation in the medium term emerging from the Federal Reserve’s average inflation policy could also fuel the uptrend of gold.
In a paper entitled “The Case for $500K Bitcoin,” Winklevoss wrote:
“Bitcoin has already made significant ground on gold — going from whitepaper to over $200 billion in market capitalization in under a decade. Today, the market capitalization of above-ground gold is conservatively $9 trillion. If we are right about using a gold framework to value bitcoin, and bitcoin continues on this path, then the bull case scenario for bitcoin is that it is undervalued by a multiple of 45.”
The medium-term bullish predictions for BTC revolve around the post-halving cycle and the bullish trend of gold. The long-term bull cases for BTC are based on the expectations that BTC could reach parity with gold.
Currently, the market capitalization of Bitcoin hovers at around $202 billion, which is less than 2.25% of gold’s valuation at $9 trillion.
Bitcoin whale clusters at $9,800 have grown in size in the past few days, indicating some whales may be preparing to sell.
According to data from Whalemap, an on-chain analysis firm that tracks Bitcoin (BTC) whales, the $9,800 support has weakened.
The researchers at Whalemap track whale activities by following addresses owned by whales — individual investors that own large sums of BTC. They explained:
“Some HODLer activity yesterday. Bubbles show where these HODLer coins were coming from. The biggest bubbles come from the pre-corona area at 9800. To me this means our support at 9800 just got a little weaker.”
Several whale clusters at $9,800 have become larger in the past several days. The data suggests that whales who bought at $9,800 are moving their BTC to exchanges.
Major Bitcoin whale clusters on the daily price chart of Bitcoin. Source: Whalemap
Bad news if Bitcoin drops below $10,000
Since the data shows that some whales who bought at $9,800 might be preparing to sell, an argument could be made that the support has weakened.
But whether the weakening support would mean BTC would drop below $9,800 is a different scenario. The $9,800 level is weaker than before but that does not necessarily mean that BTC would drop below it as a result.
A short-term bearish scenario could play out if other whales push BTC down to the $9,800 support level. Only then, the weak support could amplify the downturn of BTC in the near term.
If Bitcoin does not drop to sub-$10,000 in the immediate future, then the support level itself becomes less relevant.
Red bubbles on the Whalemap’s charts grow when whales move their funds out of their wallets. The researchers explained:
“Red bubbles show locations at which the hodlers originally held their BTC before transacting it. So imagine you bought bitcoins at the $20k peak and yesterday you decided to send them to an exchange for instance. In this scenario - red bubble at 2017 peak will appear.”
In the short term, a bearish case for BTC is that whales who bought at $9,800 sell above $11,000, bringing the price down to sub-$10,000 for a pullback.
On Aug. 23, Cointelegraph reported whales who bought Bitcoin in late 2018 sold two years after holding onto their BTC. Since then, the BTC price fell sharply from $12,500 to as low as $9,800 across major exchanges.
Similar to late August, Bitcoin is at a heavy high-time frame resistance at $11,100. A sell-off from whales at the current level could trigger a sizable pullback and a strong market reaction.
Bitcoin price is gathering strength as its dominance rate bounced from recent lows, possibly bringing a close to the altcoin season.
As the price of Bitcoin (BTC) soared above $11,000 on Sept. 16, the altcoin market suffered mightily. Some analysts believe that profits from the extended altcoin and decentralized finance (DeFi) rally may have cycled into BTC.
After major bull cycles or the so-called “altseason”,the dominance index of Bitcoin tends to recover. When it does, it often leads BTC to outperform many altcoins in the global market.
In the past two weeks, Bitcoin’s dominance has seen a double bottom, rebounding from 59% to 61%. If BTC’s dominance index continues to recover, it could cause altcoins to underperform against BTC in the near term.
F*ck altcoins: Curry tells Rogan Bitcoin is the best
Bitcoin dominance strengthened just two weeks after internet entrepreneur and podcaster Adam Curry talked about Bitcoin on the JRE podcast with Joe Rogan. While on air Curry praised BTC as a store of value and highlighted its 10-year track record as the markets’ dominant cryptocurrency.
Curry said he sold a lot of Bitcoin when it was valued at around $900. He said:
“But let me tell you, the apocalypse is coming and you're going to need a Bitcoin. At least one. I was very anti-Bitcoin until I sold a shit load of them at $900, and I could have [made a lot of money].”
Since then, Bitcoin’s price has increased to above $10,000, peaking at $20,000 in late 2017. Given its resilience throughout the past decade, Curry said that BTC is a reliable store of value.
During the podcast, Curry and Rogan briefly discussed Bitcoin and alternative cryptocurrencies that compete against it.
According to Curry, he initially denied BTC and its potential as a store of value. Eventually, as ten years passed, he said the resilience and survivability of Bitcoin changed his mind. He told Rogan:
“I got them for nothing; people just gave it to me in the beginning. I denied it, and when you look at ten years, f*ck all the altcoins and all that stuff.”
In response, Rogan asked if there is any risk in being Bitcoin remaining as the overwhelmingly dominant cryptocurrency. He asked why other cryptocurrencies cannot coexist, which would offset potential risks of manipulation.
Rogan noted that all currencies, likely referring to traditional currencies, have seen some sort of manipulation. He stated:
“Here's the question about Bitcoin. Is there a risk in having that be the standard. Like why can't there be competing cryptocurrencies? Do we have to get committed to one, and if we do get committed to one, is there a possibility of some sort of manipulation as we see with all currencies.”
While Curry did not go in-depth about altcoins, he simply said the Bitcoin’s ten-year track record speaks for itself. There were major cycles where many altcoins failed throughout the past ten years, and BTC remained dominant.
Since late 2017, Bitcoin, Ethereum, and XRP have remained the top three cryptocurrencies. Apart from the three, the rest of the top 20 have frequently changed. Curry explained:
“10 years of data have shown Bitcoin is really the only one you can trust. The way that I see it, that is really the only one you cannot manipulate.”
How will BTC perform in Q4?
Historically, the performance of Bitcoin in the fourth quarter has been mixed. In two of the past four years, BTC saw a major correction at the end of the year.
Bitcoin quarterly closing prices. Source: Skew
Given that the Bitcoin halving took place in May and historical data shows BTC tends to rally 15 months after a halving, it seems likely that Q4 2020 will be slow.
The general expectation amongst analysts is that the opening quarters of 2021 will see a stronger performance from Bitcoin.
In the near-term, BTC could remain in a range between the $9,000s and $12,000, as the accumulation phase continues.
After the September expiration happens, which occurs on the last Friday of each month, BTC would likely show a direction. For now, the continuous rejection of $12,000 and $11,100 makes a longer consolidation phase probable.
“Open interest is growing again, 134k $BTC contracts outstanding which is ~74% of total market. Next is CME with around 25k contracts outstanding. The biggest OI is held in the Sept ’20 expiry, a total ~77k of which ~59K is held at Deribit.”
The options open interest of Bitcoin. Source: Deribit
The price of Ethereum (ETH) has dropped from $488 on September 2 to below $380, falling by over 22%. If the correction of ETH continues, traders say decentralized finance (DeFi) tokens could further suffer.
Some traders are considering the possibility of a take-profit rally, as investors funnel profits from altcoins back to Bitcoin. Coincidentally, the Bitcoin dominance index rose sharply in the past week.
A Drop Below $350 For Ethereum Gets Dangerous For DeFi Tokens
Since the first week of September, DeFi tokens were hit particularly hard.
The DeFi index perpetual futures on FTX has plummeted by 35% month-to-date, within merely three weeks.
The FTX DeFi index tracks various DeFi-related tokens, including Aave (LEND), Compound (COMP), and Kyber Network (KNC).
DeFi tokens have collectively underperformed, most likely due to the slump of Ethereum. Previous Bitcoin rallies were led by ETH. This time, Bitcoin is the only major cryptocurrency that is maintaining strong momentum.
If ETH drops below $350, a pseudonymous trader known as “Flood” said DeFi tokens could see another major pullback. He said:
“Super important Level for ETH. Currently ETH and it’s ERC20 minions seem to be leading the market, would not be surprised to see another -25% day across the board for DeFi tokens if ETH trades under 350.”
Another 25% drop for the DeFi market after a large correction would hinder its momentum.
For now, cryptocurrency exchanges appear to be expecting the massive demand for DeFi to continue over the long run.
In recent weeks, top centralized exchanges have increasingly listed new DeFi tokens. Major exchanges have historically been reluctant towards listing newly-emerging tokens and often implement a rigorous verification process.
With the DeFi craze, exchanges are acting noticeably faster than before. For instance, when Uniswap’s highly-anticipated governance token UNI launched, Coinbase Pro, Binance, and FTX all listed in 5 hours since its release.
Anthony Sassano, the marketing manager at Set Protocol, said:
“I love the new trend of CEXs listing new DeFi tokens on day 1 because they are scared of losing a massive amount of volume to DEXs if they wait even a few days. I’d really hate to be one of those people who think that DeFi on Ethereum is a joke.”
The clear demand for DeFi, as evident by the climbing total value locked in Ethereum DeFi protocols, could offset the risk of a large-scale pullback.
Tesla, Bitcoin and avocados have all risen in tandem in recent weeks as trading activity spikes among millennials.
Between Sep. 9 and 16, the price of Bitcoin (BTC) rose by over 11%. Similarly, in the same period, Tesla stock (TSLA) surged from $330.21 to $449.76, by 36.2%.
Millennials love TSLA stock and Bitcoin
Tesla stock and the Bitcoin price have seen an uncanny correlation in recent weeks. The correlation might come from the similarities between BTC price movements and the S&P 500. It also might be related to the fact that millennial traders actively trade both BTC and TSLA.
Bitcoin price falls as Tesla stock price drops in pre-market trading. Source: TradingView
Tesla stock neared its all-time high when Bitcoin surged above $11,000
The day the price of Bitcoin spiked above $11,000 across major cryptocurrency exchanges, Tesla stock price neared its record high.
TSLA slumped since early September after the Financial Times unmasked SoftBank as the Nasdaq whale. Following the report, a market-wide sell-off continued with the Nasdaq falling by 10% in six days.
But after the initial drop, the U.S. stock market began to recover and the Tesla stock price rebounded. Coincidentally, Bitcoin rose from $10,300 to $11,100 at the same time.
Another asset that has seen some correlation with the price of Bitcoin is avocados. The spot price of Mexico City Hass Avocado from Michoacan has moved similar to BTC since June 2018.
One similarity between Bitcoin, avocados and Tesla is that the three are liked by retail traders and millennials, in particular.
On Jul. 14, for instance, Bloomberg reported that 10,000 day-traders on Robinhood bought Tesla shares in a single hour at the day’s peak.
Major market data providers are also noticing some similarities between Tesla and Bitcoin. As Cointelegraph reported, TradingView said Tesla and Bitcoin were the most viewed assets in July, as the demand for day trading soared.
The majority of Bitcoin investors are 18 to 34. Source: Coin.dance
The demand for avocados rose in recent months as well alongside Bitcoin and Tesla, according to avocado suppliers. Axarfruit’s manager Álvaro Martínez said:
“The truth is that, during the first months of the pandemic, the demand went crazy and we were overwhelmed with orders. Then, with the massive arrival of Peruvian avocados, prices dropped, as the Andean country shipped smaller volumes to the United States due to it being well supplied by California and Mexico. The drop in prices gave a boost to the demand, which has been higher than in the same period of previous years.”
Where does Bitcoin go from here?
In the short term, traders expect either another test of $10,110 or a breakdown to $10,200.
The Tesla stock price has dropped 2.55% in pre-market trading and it remains to be seen if it would coincide with a BTC price movement once again.
As TSLA stock dipped overnight, the price of Bitcoin dropped from $11,000 to $10,800, recording a 2.5% pullback.
Michael van de Poppe, a full-time trader at the Amsterdam Stock Exchange, said BTC is at a crucial resistance. He said:
“The levels I'm watching on $BTC are structured here. The short term still trending upwards, but on a crucial resistance to break. If $10,750 fails to hold, $10,600 is next, and most likely the area around $10,200. If $10,750 holds, another test of $11,100 seems likely.”