Blame These Traders for Bitcoin Price Crash
Recent bitcoin selling pressure actually originated from short-term traders that got bitcoin at prices between USD 10,000 and USD 12,000, claims crypto market analysis firm Coin Metrics.
By analyzing the composition of their realized capitalization measure, introduced as a reportedly more precise alternative to market capitalization, the firm discovered “important information about the psychology of current owners,” and they’ve presented the change in the number of BTC in each cost basis bin between the day before the start of the sell-off when bitcoin was at USD 10,000, which was September 20th, and October 1st. In their recent report, they’ve included three groups of traders:
- Owners with a cost basis above USD 13,000: before the market sell-off, some BTC 720,000 belonged to this group, while almost all BTC remained dormant during the sell-off, with only 4,140 moved in the last nine days, based on the analysis of on-chain activity, which suggests “that capitulation among these traders is complete” and that these are long-term holders that didn’t cause a lot of pressure.
- Owners that acquired bitcoin at prices between USD 10,000 and USD 13,000: this is fresh capital “bought in during the minor euphoria over the summer when prices reached new highs of this market cycle.” This is the cohort of traders that caused the majority of the selling pressure, and the analysis shows that “these short-term holders were protecting their positions by taking a moderate loss.” A large rotation was observed from the USD 10,000 cost basis bin to the USD 8,000 cost basis bin over the past nine days, says the report, which means that some BTC 500,000 with a cost basis of USD 10,000 was sold in that period and that the USD 8,000 cost basis bin increased by BTC 750,000.
- Owners that acquired bitcoin at prices below USD 8,000: some BTC 11.46 million belong to this group of “long-term holders with a strong long-term conviction in bitcoin,” who moved only 150,000 bitcoin on-chain. “Profit taking or panic selling was limited among these holders. This behavior indicates that for the majority of bitcoin holders, the market view of bitcoin being in a bull market remains unchanged,” claims the report, but that view might change if the price continues to decline or panic-selling begins.
“Drawdowns of a magnitude similar to what we have observed since the market peaked early this summer are rare but not unprecedented,” claims the report, as during the run-up to the 2017 bubble, bitcoin price corrected by nearly 40% from peak two times, so if the USD 13,000 level is presumed to be a local peak, “the current drawdown is also nearly 40% - the edge of historical norms.”
At pixel time, bitcoin trades at c. USD 8,344 and is up by 3.5% in the past 24 hours, but is still down more than 13% in the past week and the past month.
Meanwhile, Binance Research said today that bitcoin price tends to rise the day prior to the Chinese Golden Week, a week-long national holiday, only to fall the day it begins. This year, this week starts today, October 1. During the week, "BTC tends to fall slightly then recovers," the researchers said, noting, however, that there is no strong relationship between the Golden Week and Bitcoin price.