Over the past week, Bitcoin has been on a wild ride, marked by a price drop that triggered a surge in active addresses on the network.
This uptick in activity has taken the daily average of active addresses to its highest level since December of last year, when we saw Bitcoin reach the monumental $100,000 mark. With all this happening and the price going all over the place and the network becoming more and more active, it seems like the market might actually be experimenting with a sentiment shift. Some are now calling it a capitulation (not a very good sign for us buyers, who are always looking for lower prices to buy back in) and an apparent renewed buying interest among whales.
Surge in Active Addresses Indicates Rising Market Activity
Bitcoin’s recent price drop, down to $88,000 on February 24, seems to have given the broader market a jolt. Not only are a lot of addresses now active, but there are also many new zero-balance addresses. In fact, the increase in zero-balance addresses—often considered a sign of capitulation, or the giving up of positions—is striking. What’s happening here? Is this the start of a capitulatory moment for Bitcoin? Or is it a sign of a bottom?
Even though the number of addresses holding zero balances has risen, we cannot view this as a straightforward capitulation. Why? Because the number of *active* addresses has surged.
This sharp increase in what seems to be network activity hints strongly at the continued, if not growing, love affair with the Bitcoin network. Indeed, with the price of Bitcoin dropping this way and that, it seems at least some portion of the investor class continues to do business on the blockchain. This number also helps remind everyone that the Bitcoin blockchain is about more than just the price, and a lot of people seem more than willing to be part of it.
Whale Activity: A Clear Signal of Buy-Side Interest
One of the most important movements in the past week saw Bitcoin whales becoming more active. These large holders have added more than 20,000 BTC to their coffers since Bitcoin dropped below the $88,000 mark. This accumulation seems to suggest that Bitcoin’s biggest fans see it as a discounted price right now and are taking advantage of what appear to be buying opportunities. Historically, when whales have moved like this, it’s been at least partly because they see Bitcoin much closer to its bottom than to its top.
Whale accumulation could furnish the market with the support it needs to overcome recent price fluctuations. That event would, of course, require large players to stop selling and start buying. A lack of large-scale selling (especially in a down-trending market) obviously helps the cause of price stabilization. And if those larger players are buying, that’s even better. Put it all together, and whale behavior of late looks pretty good. And price-for-price, Bitcoin is as available and purchaseable now as it was five years ago.
Potential for Bitcoin to Reclaim $93,700 and Push Toward $111,000
Analysts are focused on the $93,700 price level as a key point for future Bitcoin price movement. If Bitcoin can reclaim this point, it could gain enough momentum to push toward the next major resistance point at $111,000. Pricing bands and market trends suggest that a reclaim of the $93,700 level could trigger a bullish breakout, with a Bitcoin price surge toward $111,000 coming a lot faster than some analysts thought.
Though this is a speculative scenario, the increasing on-chain activity and the ongoing accumulation by whales suggest that the market may be preparing itself for a shift up higher. If Bitcoin can break through the $93,700 resistance, it could trigger much more buying pressure than we’ve seen recently; especially from the institutional side that is watching the market closely. This could lead to a much broader price rally in Bitcoin that would certainly help it accrue even more credibility as the digital store of value it is purported to be.
Bitcoin ETF: Outflows and Declining Net Asset Value
Even though on-chain activity and whale accumulation have surged, the traditional financial markets have not been so rosy. On March 4, the Bitcoin spot ETF saw total net outflows of $143 million, which left the total net asset value (NAV) of the ETF at $99.374 billion. That means the NAV of the ETF has fallen below the $100 billion threshold for the first time since it started.
Capital flowing out of the Bitcoin spot ETF could show that some investors in traditional markets are losing faith in Bitcoin. But talk of an ETF draining liquidity from Bitcoin or causing some sort of market collapse misses a crucial point: the spot ETF is only one small component of the vast Bitcoin ecosystem.
Conclusion
The recent dip in Bitcoin’s price has triggered a lot of activity on the blockchain. This was to be expected, of course, since when the price drops, that’s when people either push the price back up by buying or push it lower by selling. When we looked at all the blockchain activity going on, this latest dip seems to be attracting the opposite of what I just said: a lot of selling. Bitcoin’s market is a little hard to read right now, mainly because it’s looking like Bitcoin is doing what it’s supposed to do: being a volatile asset. The spot ETFs are pulling Bitcoin out of the on-chain world, meaning that for all the activity on the blockchain right now, there might not be as many Bitcoin in the world as it seems.
Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any services.
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