How to Understand What are Investors Doing?
And What This Means For BTC's price

The sit-and-wait game while the price of BTC (and other crypto assets) is climbing is over. The market is under pressure, and many investors (especially beginners), don't understand what's going on, and in what to believe - is it the start of another "crypto winter" or just a market correction?

We prepared this material to help you to understand the full picture of crypto price movements and give you an in-depth analysis of changing volumes, big players behavior, so you will make your investment decision more correctly.

In this article you see:
1. Why is the Cryptocurrency market down?
2. How can we understand what investors are doing?
3. Who is selling?
4. Are the long-term holders buying or selling their crypto assets?
5. Will Bitcoin rise In the short term?

Why is the Cryptocurrency market down?

So, let's start at the beginning.) Only a couple of days after the much-anticipated Coinbase direct listing, on 19 May 2021, the Bitcoin market experienced one of the most significant liquidity events and price draw-downs since Black Thursday in March 2020.

During the recent sell-off, the Bitcoin network experienced a reduction in active addresses, down 18% from the recent highs to around 0.94M. This fall indicates that activity has slowed.
From $64,800 to $37,000 per BTC - the price dropped by 48% from the last high. Thousands of investors around the world lost their money and nerves. And people who are interested in financial market dynamics (you are among them if you're reading this article) are perplexed - how is it possible that the words of only one person (even so famous and special as Elon Musk) have such a huge and disruptive impact on the whole market?

However, if we would focus on the price's technical behavior, the market correction is a necessary part of the price movement. Endless price rising (same as an endless decline) is impossible.

Bitcoin had been on a remarkable bull run. The cryptocurrency saw roughly 1500% gains from the $3,800 it was worth in March 2020 to its peak in April 2021. Correction returns the cryptocurrency price from an abnormal surge to its long-term established trend.

BTC/USD
Source: TradingView

The primary question on investors' minds is whether a bear market trend is in play, or whether the market has returned to a re-accumulation range?

Top-level summary for 8th Jun 2021 (current price $37.8k):
Macro long term: In terms of where we sit in the full macrocycle, Bitcoin is still in a bull market. User growth continues to climb against a price dip, while the price is clearly below fundamental valuations.
Medium-term: The medium-term picture (over the coming months) is of course a question of how quick the recovery will be. The market remains uncertain about whether bullish or bearish conditions govern, as on-chain activity and value settlement falls dramatically.
Short term: The short-term picture is neutral, siding on bullish. Down-side risk is limited as we're in a region of being deeply oversold over fundamental price and technical structure shows strong support levels.

If you want to understand what is happening in the cryptocurrency market when the price is moving down, you need to understand where the money goes.

As the entire crypto market sold off to USD, there are really only two choices:
1. Move money to USD and withdraw it via banking paths.
2. Move to stablecoins, coins that track the value of USD. The latter being the choice of investors who wish to shelter from bearish phases yet want to have that USD in digital form to flow back into the markets quickly and easily.

How can we understand what investors are doing?
Let's have a look at this chart:
Source: Glassnode

Glassnode's Stablecoin Supply Ratio (SSR) tracks the size of Bitcoin's market cap value compared to the combined value held by the major stablecoins.

When the SSR is low, the current stablecoin supply has more "buying power" to purchase BTC. It serves as a proxy for the supply/demand mechanics between BTC and USD.
Source: Glassnode

A drop in SSR means an expansion in the stablecoin supply relative to Bitcoin's size, and therefore a lot of money are ready to flow back into crypto markets.

What about the behavior of long-term holders? Are they buying or selling their crypto assets?

Since the 18th of May, many new investors had been selling at a loss, according to Glassnode's Net Realized Profit/Loss. This chart shows us the net profit or loss of all moved coins, and is defined by the difference of Realized Profit and Realized Loss. As we can see on this chart, this process looks like be ready for ending.
Source: Glassnode
The supply held by Long-Term holders is increasing. But does it mean the market is ready for the new highs right now? There is no rush.

Will Bitcoin rise in the short term?

One thing you need to understand: when it comes to large players and volumes, reversal levels are determined in the medium term. It means you can't just buy an asset immediately after you've seen the raising volumes and expecting huge growth from the current price. It doesn't work like this. You need to be prepared for the potential drawdown of your position. This strategy only works in the long term.

Let's have a look at the potential reversal levels for the BTC price.
Currently, the Bitcoin price is hovering around 50% below the all-time high, at around $65,000. This level is supported by SMA(21) on the weekly timeframe. This is the first potential reverse level (Scenario 1).

However, if the price breaches this level (for a strong signal, on the daily timeframe a couple of the price candles should close lower than $29K), it would be a potential signal of reaching the next strong support near the $20-21,000 area (Scenario 2).

BTC/USD Short-term scenarios

Source: TradingView

The price has been moving into the range of $29,000-40,000 per BTC over the last 20 days (since the 19th of May). The $29,000-$31,000 area is a strong support area and allows the long-term investors to buy BTC for the current price.

But the potential long up-trend movement will be confirmed only if the price breaches the EMA(144) level (around $39,600). And investors who buy at the current price need to be ready for a potential drawdown of about 35%, as the next support level is around $20,000 per BTC. It's not a prediction, just a warning.
Source: TradingView

Disclaimer:
All investment strategies and investments involve the risk of loss. Nothing contained in this article should be construed as investment advice. Any reference to an investment's past or potential performance is not, and should not be construed as a recommendation or as a guarantee of any specific outcome or profit.

If you like this article and want to get more, please, share it on your social media.
Thanks for your support!

VRM and Black Ocean team