The collapse of global cryptocurrency exchange FTX shook the market and caused Bitcoin (BTC) to post a new low in the current bearish cycle on November 9: $15,588. At the same time that the unexpected event created downward pressure on the BTC price, there was also a significant increase in network activity at its core layer.
As pointed out by on-chain data analyst Cauê Oliveira of BlockTrends Research, this spike in network activity means an increase in competition for block space. As a result, two significant achievements were recorded on Tuesday the 15th: the largest number of transactions awaiting validation since May last year, and transaction fees reaching their highest value since their lowest levels in July 2021.
Network transaction fees # Bitcoin Reach higher value in 1 year and 4 months 🔥
The high action on the chain and the lack of space for each flat block are repeated.
Such spikes most commonly appear at points of a desired surrender or return #BTC.
Understand 👇🧵 pic.twitter.com/hIoVFLeVf2
– Kawe Oliveira 💊⚡ (@caueconomy) November 16, 2022
According to Cauê, historically, the combination of these factors typically occurs at times of investor capitulation or market demand for Bitcoin resuming. However, that is not what will happen now. The recently recorded low Bitcoin trading volume confirms this hypothesis.
The rise in activity on the Bitcoin network is being driven by a huge movement of investors withdrawing BTC from centralized exchanges (CEX) to non-custodial wallets. As reported by Cointelegraph Brasil, between November 6 and November 13, nearly $3 billion in BTC was transferred from CEX to the self-custody solution.
As Cauê points out, bitcoins held on exchanges are at their lowest level since February 2018:
“There are now about 2.1 million BTC ‘available’ on the exchanges.”
That is, investors do not get rid of their positions at the current low. Even because, according to recent data from the data analytics company on the chain Glassnode, 33% of long-term investors (long term ownersor LTH) losses are currently accumulating.
This is one of the highest unrealized loss rates in Bitcoin history, and is just below the record high of 36% seen during the bottom of the 2018 down cycle.
Whales and sardines are in the same boat
BlockTrends Research analyst notes that the movement towards self-guarding solutions covers all entities in the market, from those investors who own less than 1 BTC to whales whose shares exceed 10,000 BTC, indicating that there is a clear trend in the current stage. market:
“We may be facing one of the largest long-term accumulation pressures in recent #Bitcoin history.”
While Bitcoin may still suffer from potential side effects of broader market contagion from the FTX crisis and near-term volatility is likely to prevail, the BTC/USD pair is in a price range suitable for investors focused on the medium and long term. put themselves.
Cowie also claims that it is possible that the bottoms of the current downturn have not been reached. The analyst places the area between $13,000 and $14,000 likely to consolidate the bottom of BTC price before the trend reverses.
Another indicator on the chain One of the most popular among investors is the MVRV Z-Score (Market Capitalization / Realized Value) which confirms that this is the right time to enter the market. It is used by traders to calculate the supposed fair price of Bitcoin as a function of total market capitalization (market cap) versus realized value, which is a measure of that capitalization considering the current trading price. It was last traded.
Currently, the MVRV Z-Score is at one of the lowest levels in the current bearish cycle, registering -0.28. Historically, when the MVRV is less than 1, it means that the current BTC price is lower than the price at which the circulating offer was last moved – and presumably it was traded.
MVRV Z-Score. Source: LookIntoBitcoin
As of early afternoon on Thursday, the 17th, bitcoin was priced at $16,630, according to data from CoinMarketCap. Over the past 24 hours, the largest cryptocurrency in the market has been stable, with a slight increase of 0.7%.
As recently reported by Cointelegraph Brasil, analysts believe that Bitcoin’s recent decline was driven by the unexpected crash of FTX. Under normal market conditions, due to the slight improvement in macroeconomic indicators, the BTC/USD pair could have stayed above the $20,000 support, and it could even flirt around the $22,500-$25,000 area.
The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risks, you should do your own research when making a decision.