This article is written in collaboration with Unchained, the official US collaborative escrow partner of bitcoin Magazine and an integral sponsor of related content published through bitcoin Magazine. To learn more about the services offered, custody products, and the relationship between Unchained and bitcoin Magazine, please visit our website.
bitcoin fell below $60,000 over the weekend, driven by the conflict between Iran and Israel, raising fears that the escalation could lead to Western involvement in a war in the Middle East, a very common occurrence in the century. XXI that would lead to higher inflationary pressures and disrupt global supply chains and commodity markets. While skeptics were quick to mock bitcoin's near-instant selloff in reaction to news of the conflict, ironically, bitcoin was one of the only global assets open for trading over the weekend, and stock, commodity strategists premiums and bonds turned their eyes to the bitcoin chart. in an attempt to assess what the damage could be to global markets at the opening of trading on Sunday night.
Stepping away from geopolitics, this short article will take a look at the latest in on-chain spending behavior and bitcoin derivatives markets, to analyze whether the current drop from highs of $73,000 is typical of a standard bull market correction or rather of a cyclical correction. top.
Many preconceived notions of a typical bitcoin cycle have already been shattered with new highs broken ahead of the next halving taking place at block 840,000. So let's evaluate and take a look at where we are and how these conditions and investor behavior also influence what could come next.
We will analyze the on-chain data to analyze the actions of current bitcoin hodlers and new entrants to the market, before taking a look at the derivatives market to assess if there is anything concerning regarding the leverage currently present in the market. market.
First, we'll look at a metric called Multiple Days Destroyed Value, coined and created by twitter.com/TXMCtrades”>TXMC, which compares short-term spending behavior with the annual average, as a means of detecting overheated and undervalued markets. A brief look at this indicates that the bull market is underway and may have even peaked.
We can attribute about a third of the spending to a simple transfer of coins from the Grayscale bitcoin Trust to new ETF participants like BlackRock, Fidelity, and Bitwise. However, the raw data is just that – the raw data – and we can see that a significant amount of spending has occurred with the push to new highs.
However, a closer look at the metric shows that this spending activity is cooling and there is historical precedent for new highs in the market in both the 2017 and 2021 cycles; This is simply a fact to take into account.
Next, by looking at the interaction between HODLers and new entrants, viewed through the lens of short-term and long-term holders, we can see that during a typical bull market, revisions to the cost base of long-term holders Short term are not only typical but also quite healthy.
Furthermore, the ability of this approximate price level to serve as support is a characteristic of bull markets, while the opposite is true in a bear market, where this psychological level of the average price of short-term holders (cost basis) it often serves as an ironclad psychological barrier. and technical resistance. As for where that level is today, approximately $58,500, which means that in no way is a visit to this level a guarantee or certainty, but rather something that is perfectly within the norm of expected activity in a bull market.
Turning our attention to the derivatives market, there has been a healthy surge of leverage and speculative froth across the market. Open perpetual futures on bitcoin terms are near the lowest levels seen since 2022, while futures have traded at a slight discount to spot markets since the weekend crash. While there is no law or guarantee that this will cause immediately higher prices, similar positioning in the past has fostered the conditions for price appreciation, and compared to the speculative froth of a speculative premium in market prices futures market observed in recent years. about a month, it's a welcome development.
In terms of points of interest when looking at the derivatives landscape, the buildup of liquidable leverage above $70,000 continues to grow, with emboldened short positions looking to push the price significantly below $60,000. While there is some leverage to remove below the $60,000 level, the real prize for the bears is below the $50,000 level.
While crazier things have certainly happened to bitcoin than a -33% pullback from all-time highs, spot demand is likely to be strong from $50,000, and an elimination of open interest and the start of a negative futures premium relative to spot markets suggest most of the pullback has already taken place. It would likely take a major moment of risk aversion across the macro landscape for this to play out, and any dip would likely be fleeting given the perpetual reality of the pace of fiscal deficit spending.
Conclusion: This bull market has legs, and the current pullback from the highs, along with any future declines in the exchange rate, should be a welcome development for investors with a long enough time horizon who understand where this is all headed. bitcoin fundamentals continue to improve, with pullbacks serving to purge leverage and weak speculators during secular bull markets.
BTFD.
This article is written in collaboration with Unchained, the official US collaborative custody partner of bitcoin Magazine and an integral sponsor of related content published through bitcoin Magazine. To learn more about the services offered, custody products, and the relationship between Unchained and bitcoin Magazine, please visit our website.
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