Coinbase: Speculators are responsible for cryptocurrency market decline
Analysts at Coinbase assure that long-term bitcoin holders hardly ever sell VTCs in the falling market.
Coinbase’s “Elusive Bottom,” a June report, said miners and companies forced to liquidate their positions to remain solvent amid a liquidity drain demonstrated: the industry is facing credit risks, not a crisis.
The number of bitcoin holders has dropped to 77%, although back in early 2022 the figure was 80%. The report also states that bitcoin has managed to show that it is a strong asset. The number of long-term holders was over 60%. This is even higher than at its peak in December 2017. The situation was not even affected by the high turbulence in the market. Coinbase says that centralized blockchain lenders (CeFi) increased their short-term debt at the peak of the bull trend.
“They were taking huge loans on DeFi protocols and shrinking capital to counterparties that were paying even higher interest rates. Some counterparties had duration mismatches and serious re-listing of assets on their books” provided to hedge funds and other entities,” the report said.
The report’s authors believe that the credit crunch was building up until a severe correction hit the market, reinforcing a kind of contagion effect that quickly spread through the market.
Compounding the ongoing credit crisis, listed miners, who had taken out huge loans secured against bitcoins or mining equipment during a bullish trend, were forced to sell their positions amid falling asset values. But since the top 28 publicly traded mining companies account for only 20% of Bitcoin’s hash rate, their sales don’t have a significant impact on trading volume.
Analysts at Glassnode argue that the massive drop in the market has led to a “flight of tourists and margin traders.”
Hoarders continue to accumulate bitcoins, and the pace has increased significantly over the past month. Small holders, who hold no more than 1 BTC in their wallets, have purchased nearly 60,500 BTC in a month. And this is “the most aggressive pace in history.”
Activity in the Bitcoin network has decreased noticeably – in November there were more than 1 million active addresses daily; now the figure is about 870,000. At the same time, if you count exactly the market participants – companies and holders with multiple wallets – their number even reaches 244,000 per day.
The number of daily transactions, meanwhile, remains at about the same level. On the one hand, it speaks about the lack of demand from new market participants. On the other hand – it shows the intention of long-term investors to keep coins further.
Bitcoin onchain metric are stronger than ever
Galaxy Digital analysts published a report that examined key bitcoins onchain metrics (BTC), compared the world’s main cryptocurrency to other asset classes and explained what events could be the catalyst for the coming price rally. The company is confident that the bulls have plenty of reasons to remain optimistic – even despite difficult macroeconomic conditions.
BTC has become the best performing asset of 2023
Bitcoin is the best performing asset in 2023 compared to a lot of stocks, fixed income securities, indices, and commodities. It shows the best or some of the best performance over various time horizons (except for 1 year), and it looks even stronger over the long haul.
In addition, bitcoin’s correlation with the Nasdaq and S&P 500 stock indices has begun to decline, while its correlation with gold, which is considered a classic haven asset, has risen sharply. This happened against the backdrop of the crisis that engulfed U.S. banks and led to the closure of Silicon Valley Bank, Silvergate and Signature.
Given the nature of the current crisis, in which the system of partial bank reserves is tested for strength, the fundamental characteristics of the BTC favorably distinguish it from traditional assets.
Accumulation, not driving price rally speculation
A number of key market indicators indicate that bitcoin’s price rally is driven by the accumulation of coins on the spot, not speculation in the derivatives market. The futures funding indicator has remained virtually unchanged since the beginning of 2023 – meaning that the market is net-neutral regarding speculative positioning. The same can be said about volume and open interest in the CME.
The total number of addresses with non-zero balances also continues to grow rapidly, with more than 45 million wallets holding BTC today. At the same time, most of them have never spent coins, but only received new ones.
The approaching halving will affect the level of inflation in the BTC network
The next bitcoin halving will occur in April 2024 and will cause the network’s inflation rate to fall below 1%. The halving events of 2012, 2016 and 2020 catalyzed a price rally and reached a new all-time high as investor demand for BTC quickly exceeded the declining supply level.
This event will put bitcoin among the most stable assets and make it less susceptible to inflation than gold and silver.
Early we reported that Whales are interested in Litecoin, again.
Whales are interested in Litecoin, again: will it help LTC price return to the $100 mark
In February, Litecoin, albeit briefly, returned to the $100 level for the first time since the collapse of the Terra ecosystem in May 2022. In early March, the price of the asset dipped below the $70 mark again. But that didn’t seem to hinder the whales’ plans, as large holders actively bought LTC during the correction.
Whale activity continues to rise
According to analyst firm IntoTheBlock, the average LTC transaction size increased more than 600% in March 2023, from $13,355 to $81,022.
The increase in average transaction size as the price pulls back signals an influx of large investors looking to buy back the decline in the asset. Given the financial strength of the whales, this could push LTC to another rally in the coming weeks.
Litecoin price forecast – could reach the $110 mark
Santiment’s Market to Realized Value Ratio (MVRV) shows that investors who bought Litecoin in the last 30 days made a 10% profit. According to historical MVRV readings, LTC holders have often captured profits of around 20%. This means that the $100 level is likely to be the next resistance zone.
If the price of the asset can combine above $100, the coin may continue its upward movement towards $115. However, bears can reverse the situation if the LTC falls below $80. With further declines, LTC could fall back below $70.
Early we reported that China intends to work with crypto-businesses through Hong Kong.
China intends to work with crypto-businesses through Hong Kong
Hong Kong subsidiaries of major Chinese banks began to provide services for local cryptocurrency firms involved in projects related to Bitcoin, altcoins and various startups. It was reported by Bloomberg, citing sources in the region.
It is alleged that the local branches of Bank of Communications, Bank of China and Shanghai Pudong Development Bank have begun, or are working to provide banking services to crypto-businesses. According to the publication, a representative of an unnamed Chinese bank even visited the office of a crypto firm to promote the services of the financial institution. A top manager of an unnamed large Chinese bank said in a media commentary that banks promote their services in Hong Kong due to the tacit approval of Beijing. The interest in the business is also due to the uncertainty around lending to the local market, they said.
Loyal attitude to the market of cryptocurrencies in Hong Kong has already “bounced back” to local investors with considerable losses. According to calculations by local law enforcement agencies, the region lost over $200 million in 2022 alone. 2,336 cases of crypto-fraud were registered in Hong Kong in 2022.
However, Chinese authorities’ interest is not limited to the crypto market. In early March, the South China Morning Post reported that China intends to stimulate the digitalization of the economy in Hong Kong with its own currency. The authorities are offering citizens a 20% discount for making payments in digital yuan. At the same time, the promotion is valid only for Hong Kong citizens and only in the southern technology center of Shenzhen (connecting China and Hong Kong).
Recall that in the fall of 2022, Hong Kong authorities announced plans to develop a cryptocurrency market in the region. According to the Hong Kong government’s website, the authorities will work with local regulators to create “favorable conditions” for developing the local cryptocurrency industry.
Early we reported that Cryptotraders lost more than $250,000,000 in liquidations after Fed rate hike.
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