Net inflows on Bitcoin exchanges rose significantly on Sunday. While “extreme fear” dominates the market, more and more BTC are stored on illiquid “hodl” addresses. How does this go together? Market Update.
After Bitcoin has been almost acting as a stablecoin against its will in the last few weeks, the crawl in the BTC price may soon come to an end. For example, BTC deposits on spot exchanges recorded a significant spike on July18, indicating an increased willingness to sell. Reason to panic? Spoiler: No.
Bitcoin deposits up massively – buying opportunity in sight?
On-chain data platform Cryptoquant registered a net inflow of over 28,700 BTC on Sunday for wallet addresses that could be matched to crypto exchanges. That’s the highest level since late February, when the bitcoin price hit the $57,000 mark. This was followed by a short but sharp drop to 45,200 USD. Therefore, it cannot be ruled out that another dip is in store for the bitcoin price.
More BTC is being parked on exchanges again. Source: Cryptoquant
But would a sale even be worthwhile for the majority of investors at this point in time? Data from the blockchain analysis company Chainalysis at least indicates that the majority of BTC units are currently significantly up. Over ten million BTC could currently be sold for a profit of over 100 percent.
Unrealized profit and loss of all Bitcoin units. Source: Chainalysis
hile net inflows and unrealized gains suggest a selling sentiment, these two metrics alone are not enough to declare a bear market. In fact, an overwhelming (and growing) number of all BTC “mined” to date is on wallets that are considered illiquid – in other words, the number of coins being mined is steadily increasing. Over 15 million BTC are stored on wallets that Chainalysis categorizes as “illiquid”. Liquid addresses are those wallets that resend more than two-thirds of the BTC received. For illiquid wallets, however, this value must be less than a quarter.
Liquidity of the Bitcoin units held The
signs also tend to point to “hodl” when it comes to the average “age” of the coins – i.e. the period of time during which a Bitcoin unit was held on a wallet.
“Extreme fear” despite growing hodl mentality
For example, the number of BTC held in the short term (0 -2 weeks) has decreased by over 40 percent in the past 90 days. Meanwhile, there were increases in “medium aged” (2 – 52 weeks) coins, while the number of bitcoin held long term (over a year) was nearly stagnant at -0.7 percent over the same period.
Given the growing number of institutional players in the market, retail investors should not
However, sentiment analysis suggests that this is exactly what is currently happening.
<img src=”//www.w3.org/2000/svg’%20viewBox=’0%200%20640%20575’%3E%3C/svg%3E” alt=” height=”575″ width=”640″ data-src=”https://www.btc-echo.de/wp-content/uploads/2021/07/fear-and-greed-index-19-7-2021.png” />Crypto Fear and Greed Index. Source: Alternative.me
The “Crypto Fear and Greed Index” has been at “Extreme Fear” since the sharp price correction in May.
Crypto Fear and Greed Index. Source: Alternative.me
The last time “extreme fear” dominated market sentiment was after the Corona crash in March 2020. At least there, Warren Buffet’s famous stock market bon mot “Be fearful when others are greedy and greedy when othersare afraid” has proven to be a valid investment strategy in hindsight.
Disclaimer: The assessments presented on this page do not constitute buy or sell recommendations. They are merely an assessment by the author. DYOR remains the overriding maxim.