As stated by Delphi Digital, a US-based crypto research firm, Bitcoin (BTC), has recovered and commenced its series of hitting all-time highs.
It seems to have fallen in another narrow range where it could be held for weeks or even longer. Nevertheless, as opposed to the previous cycle, the world’s most extensive crypto-asset seems to be “right on track” and “the comparisons between cycles are impressive.”
Despite that, investors might want to display some tolerance and keep early 2017 close in the rearview mirror. In their latest report, the firm has stated that during that same year, “BTC initially sold off, recovered, retested, broke to a new high, and then corrected another 25% before continuing its uptrend.”
While there are fundamental themes that have been feeding bitcoin’s rally, including increased exposure by institutional investors in the market who have net long positions, record BTC options volume and open interest, a 20% decline in bitcoin held on exchanges since February, and more signs, investors now want to know:
- where BTC goes from here,
- and when it will breakout to the upside “to confirm the sustainability of its latest jump.”
Following the researchers, a “move above USD 20K on strong volume” could “really seal the deal.”
The report declares that the bitcoin bull market has only just begun, and what we see now is profit-taking, considering that “almost every BTC holder is in profit.”
If history is any evidence, then the very selling that took place last month could be a key indicator for the future direction of BTC. While conventional wisdom might suggest that selling is bad for the price, cooler heads point out that “long-term holders on aggregate don’t sell during bear markets, rather that’s when they accumulate,” the report states. BTC hodlers appear to be taking a page out of the Wall Street crowd, who go by the motto “buy low, sell high.”
This trend is evidenced by the below chart in which Delphi Digital illustrates that the percentage of bitcoin supply last active more than a year ago (the blue line) “rises while the BTC price falls in each of these cyclical periods.” The firm points to the UTXO, or Unspent Transaction Output, represented by the yellow line and reflects long-term holders.
BTC seemingly has a habit of rising after the UTXO peak has been reached.
It is a virtuous sequence in which bitcoin long-term holders scoop up more BTC during market sell-offs. Presently “stronger hands” are holding more of the bitcoin supply, stimulating the market and fueling bitcoin’s latest all-time high.
That’s when the investors take some profits and “sell into the buy pressure coming from new entrants to the market,” the report said. This, in turn, makes the price drop amid “short-term holders with weaker hands,” presenting the long-term holders a chance to buy, and the cycle repeats itself.
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