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On Monday, cryptocurrency bulls seized control of the market, with Bitcoin leading the charge, breaking over the $30,000 resistance level it had been trading below on Sunday, and now heading towards $32,000, a price level not seen in 20 days.
Bitcoin grew by more than 8%, surpassing the $31,000 threshold, fueled by worldwide investors as Asian and European equity markets soared. The United States' markets were closed on Memorial Day. The market bounce can be attributed to a lower dollar and an on-chain report from Glassnode indicating that Bitcoin holders are now "the only ones remaining" and appear to be "doubling down as values drop below $30,000."
Marcus Sotiriou, an analyst at digital asset broker GlobalBlock, stated in a Monday note, "Bitcoin broke above $30,000, but it must maintain the $29,300 mark on a retest to indicate continuing to the higher." The crypto market was long overdue for relief, as the U.S. stock market rebounded last week following Jerome Powell's speech that provided clarity on their plans to carry out a soft economic landing.
What you should know
- As indicated previously, the market rebound is fueled by a rise in Asian equities, which were optimistic on Monday due to the fact that key Chinese cities have begun to loosen coronavirus restrictions after months of stringent lockdowns.
- Traders speculated that the reopening of the economy would spur a rise in consumer spending, which may boost firm revenues in the following weeks and signal a bottom for regional equities.
- The Currency Index (DXY), which gauges the strength of the United States dollar, also weighs on markets. In the last two weeks, the DXY has fallen 3.09 percent from its 20-year high of almost 104 basis points to its current trading level of 101.65 basis points as of the time of writing.
- In addition, a Glassnode analysis on the market indicates net accumulation in the $30,000 trading zone. Unlike the sell-offs that happened in March 2020 and November 2018, which were followed by an increase in on-chain activity that "started the ensuing bull runs," the most recent sell-off has yet to "inspire an influx of new users into the space," according to the paper.
- Analysts at Glassnode believe this shows that hodlers are mostly responsible for the current market activity/buying spree (Individuals who have previously bought cryptocurrency and are holding their positions for the long term).
- Contrarian investors regard BTC's sideways price action as an opportunity to accumulate, as indicated by the Bitcoin accumulation trend score, which according to Glassnode "has returned a near-perfect score over 0.9" for the past two weeks.
- Moreover, according to Glassnode, high scores on this metric during negative trends "often occur after a very big price fall when investor mentality flips from uncertainty to value accumulation."
- A closer look at the data given by Glassnode reveals that the recent accumulation has been driven primarily by entities with less than 100 BTC and more than 10,000 BTC.
- During the recent volatility, the total balance of entities holding less than 100 BTC grew by 80,724 BTC, which Glassnode stated was "remarkably similar" to the net amount of 80,081 BTC liquidated by the LUNA Foundation Guard.
- During the same time period, entities with holdings greater than 10,000 BTC added 46,269 Bitcoin to their balances, whilst entities holding 100 to 10,000 BTC "kept a more neutral grade around 0.5, indicating relatively little net change in their holdings."
Long-term Bitcoin holders appear to be the primary driver of the current price activity, with some actively accumulating and others experiencing average losses of -27 percent. Despite some long-term holders' selling, the total supply held by these wallets has just recovered to its all-time high of 13,048 million BTC.
Glassnode noted, "Unless significant coin redistribution occurs, we may expect this supply metric to begin growing within the next three to four months, indicating that HODLers will continue to steadily absorb and hold onto supply."
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