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Last week, over 231,000 Bitcoin [~$2.54 billion] and 3.5 million Ether [~$1.05 billion] getting gain of over 25 percentage were shipped, according to the most recent market intel report by blockchain analytics company Chainalysis.
That is a bullish market, one in which the king coin is priced at over $11,500 (Its greatest price because August 2019) and upward by over 70 percentage year-to-date, while recouping over 200 percent of its own value because falling to $3,800 at March 2020. The identical market also observed Ethereum surging into a couple of high. So the question arises – can the market absorb this type of sell-off?
To start, the recognition of gain is simply natural. If any advantage generally strikes by 25 percentage, investors, that aren’t ‘typical hodlers,’ generally appear to liquidate their holdings. Some scale it back into the advantage that saw them attain these benefits, but some spend or diversify. In any event, the report doesn’t mention exactly what route this ‘sell-off’ has obtained i.e. either reinvesting, diversification, or a different path, but merely cites that a sell-off has ensued.
It must also be noted that the report claims the various cryptocurrencies have been “sent,” but doesn’t mention a destination to get exactly the same. Considering that the report states this ‘sending’ of Bitcoin and Ethereum was to “realize the gains,” that it is probable that the cryptocurrencies were shipped for liquidation, either via exchanges or alternative paths. Sticking to the same, info from Chainalysis demonstrated that Bitcoin inflow to trades was 7.4 million BTC in August, over the 90-day average.
This surge into liquidate holdings is like the amounts of February 2020, a period when Bitcoin jumped over $10,000 for the very first time from the calendar year. However, a month following this move up, it fell under $4,000, more so because of this stock marketplace crash and its aftereffects on the Bitcoin market. The report added that the fall between the $10,000 surge and the mid-March crash was because of ‘market absorption.’
“This is a similar amount as was sent in mid-February 2020 when prices were last sustained at current levels. Prices fell after mid-February, likely, in part, as the market absorbed this extra supply.”
Given this historical statistics and how the price hadn’t within risen over its February 2020 amounts, but has become sustaining over it, the issue will be the market consume this kind of excessive supply? Looking back at 2017, the report stated that the amount of ‘profit-taking’ in the Bitcoin markets, based on the price surge, is “relatively low.”
Compared to Bitcoin’s previous five-figures surges, in December 2017 and July 2019, a larger amount of Bitcoin could be sold to maintain the price, however, the market is not such a level of demand yet.
In every bull market, there are those who hodl from expectation of a price rise and there are those who liquidate at expectation of a price rise limit which has been reached in their eyes. If the latter outnumber the former, a rush to liquidate at a level would pull the market price down.
Such was the case a week ago when the price dropped just after going above $12,000. Now that the price has survived this drop, and has been trading over $11,500 for a week since, a new level will have to be discovered, one which might push the prices down. At that level, if the hodlers are outnumbered, a rush to liquidate will resume and marketplace absorption is going to come into play.