Bitcoin’s price correction in the ongoing rally was rather short-lived and the asset is back trading at the $32400 level based on data from CoinMarketCap. Though traders endured losses in the dip, and institutions continued buying, the dip was rewarding for altcoins as it changed the direction of investment flow. Against 100% wallets HODLing Bitcoin being profitable, currently, there are 88% HODLers in profit. The dominance of Bitcoin is at 63.9% and this suggests that the active supply hitting exchanges may indicate a sell-off and bearish sentiment among users, buying altcoins with double-digit gains. In the current market cycle, altcoins like LINK, UNI, ATOM, MKR, and CEL are in the top 40 altcoins based on market capitalization, and the sideways rally of Bitcoin may have led to double-digit gains for these altcoins in the past 24 hours.
More specifically, based on the ROI of several altcoins, averaged over 30-days higher gains were posted since December 2020.
There is a significant increase in ROI in the past week for top altcoins in the chart, for XLM and AAVE, there has been an increase from 20% to 120%. Due to the correlation with Bitcoin, it is safe to conclude that it is likely that Bitcoin’s rangebound price rally fueled the boost in altcoin price and ROI, though the overall market cap may have dropped. The top altcoins that made significant recoveries on account of the sideway movement were DOT, with over 5% gain in a week, LINK with 18.8%, and XTZ with 8.8% among others. The double-digit gains and the additional surge in volume would be a challenge if Bitcoin wasn’t range bound. Further, it may be helpful that in this bull run, Bitcoin maximalists are quieter than they were about ICOs in 2017. This may be a positive sign for DeFi and altcoins, which have increased in market capitalization and TVL over the past two months.
In his recent post, @ByzGeneral noted that most altcoins were performing better than Bitcoin. Bitcoin’s consolidation was profitable to the altcoin market and DeFi in particular as the ROI of UNI and LINK increased considerably compared to other altcoins. Before the current market cycle, in early 2020, DeFi projects added millions in market capitalization through Bitcoin’s halving and subsequent price drop. Given that the drop in price follows when the asset is rangebound, it is possible that it may contribute to an altcoin rally.
Global crypto population surpasses 100 million; Boomers and Gen X now ‘keen on Bitcoin’
A survey from digital asset exchange Crypto.com estimated a 15.7% increase in the global crypto population, in January alone. Overall, there are 106 million global crypto users as of January 2021.
According to researcher Kevin Wang, at Crypto.com, strong growth in Bitcoin adoption happened to be the main driver for the peak. Major events last year, such as PayPal’s decision to integrate crypto into its payment network and institutional adoption of cryptocurrencies fueled the surge. Other than BTC, the growth of DeFi allowed Ethereum to lead the crypto market’s growth in August 2020.
The months of June and August last year and January 2021 “were exceptionally strong months” in terms of a surge in crypto population. Wang noted that such periods of strong growth in adoption accompanied periods of strong price performance in Bitcoin.
To estimate the number of global crypto owners, the calculations were made through BTC and ETH on-chain data, separately, and combined with other parameters. Crypto.com stated that the findings were subject to some limitations and caveats.
The analysis is also built on Crypto.com’s own internal data, as well as on-chain data and survey analysis. But, this may not estimate OTC users and off-chain transactions effectively. The fact that sub-accounts in exchanges may not be reflected accurately was also noted. However, researchers assumed that all on-chain users still own crypto today, while others could have sold their holdings already.
Meanwhile, another survey revealed that Baby boomers and Gen X are “piling” into Bitcoin and other cryptocurrencies.
Nigel Green, CEO and founder of deVere Group said that the company’s global poll found that 70% of clients aged over 55 have already invested in cryptocurrencies or are planning to do so this year.
Green explained that while the crypto rally captured the attention of ‘digital native’ younger generations; older generations such as Boomers and Gen X recognized that “digital, borderless money is the way forward.”
“Social media hype and clickbait headlines” happened to be a catalyst for millennials and Gen Z to invest in Bitcoin. But respondents aged over 55 were interested in crypto due to a fear of currency devaluation – as central banks have historically printed more money to boost economies. Especially in wake of the pandemic. Green further commented:
They’re [older generations are] aware that if you are flooding the market with extra money, then in fact you are devaluing traditional currencies – and this, and the threat of inflation, are legitimate concerns, prompting them to seek out alternatives.
Why Cardano’s price recovery is more organic than reflexive
Cardano, like most alts in the market, depreciated significantly between the 21st and 23rd of February. In fact, ADA dropped by as much as ~30%, with the crypto-asset falling to $0.81 at one point. It should be noted, however, that the crypto-asset managed to consolidate its position above $1 over the last 24 hours, with the surge back up being more than just a reflexive pullback.
For Cardano, organic activity and distribution might be playing key roles right now, with both allowing the crypto-asset to recover on its own over the past few hours.
ADA continues to accommodate high active addresses
Active addresses for ADA have risen by 26.48% over the past few weeks, a finding indicative of consistent activity for the token. In fact, total addresses also climbed to a high of 1.02 million on 23 February, incidentally, on the last day of bearish corrections.
Further, the Active Address Ratio was also a healthy 12.60%, despite pullbacks. However, more than anything else, it seemed to be wealth distribution that was painting a better picture for Cardano.
At press time, the highest ownership of Cardano tokens was associated with retail addresses i.e addresses that hold less than 0.1% of the circulating supply. Whale addresses that hold more than 1% of the supply were limited to only 2.36%.
The aforementioned distribution stats, represented by the attached pie chart, are significantly positive for Cardano from the perspective of adoption. Additionally, in February 2021, the number of traders holding ADA (Holding period less than 30 days) has been the highest, underlining the hike in the number of new holders of the token.
While hodlers are at a yearly low in terms of numbers, the likelihood of these addresses selling at a high of 10x is extremely plausible.
Cardano is less volatile, but is correlation a problem?
With respect to the 2017-18 bull run, the volatility index for Cardano is relatively manageable. The volatility in ADA’s market is currently level with the figures seen in January 2020, with a recent spike in the same following a wave of abrupt corrections on the price charts.
However, there is a probability that Cardano’s high Bitcoin correlation might skew its individual performance going forward.
A higher correlation with Bitcoin usually disrupts organic growth over the long-term. If the chart is properly analyzed, the correlation has been turbulent since mid-2020 so, there is a possibility ADA may diverge away from BTC’s performance in the months ahead. However, if the press time outlook is taken into consideration, it seemed more likely that the movement of Bitcoin will be intertwined with ADA for the next few days and weeks.
Bitcoin’s comeback to $55,000: When and how?
At the time of writing, Bitcoin was trading around the $50,000-level, with the crypto-asset on the road to recovery following the market-wide depreciation on the 23rd of February. Now, the price drop was largely due to miner inflows, stablecoin inflows, and activity on Bitcoin’s network.
However, what often gets forgotten is the fact that activity on derivatives exchanges can be considered to be indicative of the ongoing price trend. Ergo, it’s worth noting that based on data from Skew, BTC Futures volume hit an ATH on the charts yesterday.
In fact, its impact was felt across spot and derivatives exchanges after the price made a comeback above the $50,000-level. The previous ATH in Bitcoin Futures Open Interest was observed last month. At that time, the ATH fueled a rise in Bitcoin’s price, with the same hitting a new ATH of $40,000 before the end of the second week of January 2021.
Additionally, Bitcoin trade volume on all exchanges seemed to suggest that there was a spike in trade activity. The 24-hour gain in price was over 6%, at press time, and Bitcoin inflows, though reduced, hadn’t dropped to pre-ATH levels.
Further, at the press time inflows rate, the volatility was observed to be 16.15%, according to Woobull charts. Before 2021, exchange-traded volume last hit a peak in the last quarter of 2020, with the same characterized by an increase in Bitcoin’s price as well.
Exchange-traded volume too has emerged as a relatable metric for assessing Bitcoin’s price action and trend reversal. Based on the exchange-traded volume at press time, Open Interest in Bitcoin Futures, and miner inflows, the volatility of the asset had risen from 14% to 16.15%, with the same being a positive sign for the ongoing price rally.
Other signs of bullish development in Bitcoin’s price include Square adding $170 million worth of Bitcoin to its existing purchase and institutional demand rising consistently. Hence, it’s evident that there’s a lot of support behind Bitcoin’s recovery.
In fact, there seemed to be additional support pushing the price to cross the psychological hurdle of $55,000 in the short-term since retail traders and institutions have bought Bitcoin at this price level and above it as well, all the way to the ATH. Hence, there may be a comeback for Bitcoin’s bull run on the price charts, before the $2.5 billion Options expiry on Friday.
Why it’s critical to monitor Bitcoin miners’ position over the next 2 weeks
The narrative of a bear-led correction is always around, even during the headiest of bull runs. A similar situation is unraveling at the moment, with many still expecting Bitcoin’s performance to take a more calamitous turn.
At press time, while Bitcoin had recovered to climb north of $50,000, some key on-chain metrics seemed to suggest that selling pressure might not be done yet, especially on the miners’ side.
Bitcoin Miners’ Outflow Multiple, Volumes on the rise
According to Glassnode data, Bitcoin Miner Outflow Multiple climbed to touch a monthly high after BTC’s decline on the charts. The aforementioned metric relates to the period of time when the amount of Bitcoin flowing out of miners’ addresses is higher than the historical average.
Alongside the same, Outflow volumes of Bitcoin miners also climbed to a 1-month high with over $4.5 million on a 7-day average.
Now, while at first glance that may sound concerning over the short-term, the fact of the matter is that the long-term perspective is still in the green.
The Miners’ Position Index is a good example. When the market was correcting back in mid-January, the MPI had surged to a high of 12.65, underlining extremely high selling pressure from miners (An Index reading of over 2 suggests that a majority of miners are selling). On the contrary, the latest drop in Bitcoin’s price pushed the MPI only up to 3.50, with the same down to 2.56, at press time.
Further, additional data seemed to suggest that small miner outflows may have contributed to high outflow volumes since these entities need to balance out their cash reserves on a consistent basis.
Bitcoin hashrate and difficulty is still relatively high
The relative hashrate for Bitcoin has dropped over the course of February, but it is important to note that over the past 3 days, the relative change is very negligible. In fact, the current hashrate is still well above 2020’s highest rate, a finding that means that miners are still active and possibly profitable, despite corrections being the norm for most of the past 24-36 hours.
On the question of mining difficulty, the attached chart seemed to suggest that the difficulty was at an all-time high on 23 February with a hashrate of 21.724t. With a difficulty adjustment imminent on the charts, a minor correction would mean that bear-led corrections would not be dragged forward due to miners’ activity.
That being said, it remains critical to monitor miners’ position over the next couple of weeks.
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