After weeks of Bitcoin (BTC) sell-offs, high-net worth Bitcoin holders, or whales, are finally back to buying.
Their buying activity not only picked up when BTC’s price broke out of the two-months ascending triangle to new all-time highs, but it has also stayed intact since the price crash on April 18.
Whales have come back to accumulate Bitcoin
Whales’ continuous buying activity comes at a time when the number of addresses holding more than 1,000 Bitcoin has reached its four-month support line.
This is probably not a coincidence, as the turnaround takes place at a time when profit-taking in the market is close to its support line too.
Current profit-taking behavior has followed a seven-month trend
The level at which profit-taking takes place can be derived from the adjusted spent output profit ratio (aSOPR), which measures the ratio between the price sold and the price paid for a coin while disregarding temporary coin movements (movements within less than one hour).
In other words, aSOPR measures how much profit holders were sitting on (in U.S. dollars) at the time they sold their coins.
Since September 2020, profit-taking has continuously found positive support at higher levels. This suggests that whenever sell-offs have happened in the past seven months, sellers have been comfortable not selling at a higher profit level each time, compared with the previous sell-offs. However, this trend might eventually come to an end.
Profit-taking activity suggests the market is at a pivotal moment
When zooming out and looking at profit-taking behavior in all prior bull markets, it becomes apparent that this is not only a one-time or a short-term trend but rather a longer-term pattern in Bitcoin bull markets.
These support lines tend to hold for three to 18 months. The chart below shows that a break of the second support line in each bull market hahistorically confirmed that the bull market top was in.
Not only is the aSOPR close to breaking the seven-month support, but there is also one major difference in the latest pattern of this metric that could be a cause of concern.
Usually, the short-term tops of the aSOPR come in at higher levels each time, as the price increases further and rising confidence leads people to hold on to higher profits after each sell-off.
However, in the latest pattern, profits have been realized earlier in every sell-off wave for the last three months (see the red arrow), a pattern usually common after a bull market top was already in.
Short-term sellers are in the driver’s seat
The latest pattern could be explained by a slower price increase in recent months and a higher number of short-term holders realizing profits. This assumption is confirmed by looking at HODL waves, which visualize for how long Bitcoin is held.
The redder the color, the shorter the holding period. It becomes visible that it is short-term holders, who have held Bitcoin for between one week and three months, who have been primarily selling into the market as of late.
When looking at the profit-taking behavior of short-term holders only, one could infer that this cohort of traders might almost be done selling. The latest dip below the value of 1 shows that short-term holders have even started realizing losses.
In a bull market run-up, this is usually where a bottom in price can be expected, as selling activity tends to decrease significantly.
However, as bull market tops are not formed by a lack of sellers but rather by a lack of buyers, it is highly important to also look at the trend of the current demand side.
Current on-chain volume activity suggests that the capital inflow trend is still intact. A high number of coins are still changing hands, suggesting that buying activity is still ongoing. The realized price, which expresses this buying activity by valuing all Bitcoin based on when it last moved on a daily basis, gives a good idea of how much capital has moved in and out of Bitcoin.
A steep curve suggests high on-chain transaction volumes. If it is followed by a flat trend, it usually indicates the beginning of the bear market, as not enough buyers are coming into the market and willing to pay higher prices anymore. As long as this steep curve does not flatten, there should be no concern about a dwindling number of buyers.
Although this evidence suggests that the bull market top is likely not in yet, there is also no clear confirmation that sellers are done selling just yet.
A break of the aSOPR 10-day moving average support line could be confirmed in the next few days. This may signal a trend shift in sellers’ behavior from bullish to bearish. Therefore, a negative short- to mid-term scenario should be considered if this occurs.
Support levels in a bearish case
There are two major price support levels to look out for. The first one is around $51,325, which could be a support level where whales most recently acquired a high volume of Bitcoin.
The second price support level is the network-value-to-transactions (NVT) ratio price, which is currently at $47,679 and is a major price support level in Bitcoin bull markets.
If the market price were to fall significantly below the NVT price without a quick recovery within a few days, a detailed analysis of the demand side would be needed to judge if the market’s bullish structure has broken.
Market at a critical level, with strong support between $47,000 and $51,000
The supply side suggests that sellers are currently in the driver’s seat, even selling Bitcoin at a loss in the past few days. However, their selling activity is expected to significantly reduce over the next few days if current behavior stays in line with prior bull market sell-offs.
If that is not the case, the breakdown of the aSOPR seven-month support line is likely and could signal a trend shift from bullish to bearish selling. Further downside should be expected, with the next major support in the range of $47,000 to $51,000.
On the demand side, the capital flow still looks healthy. Enough volume is still willing to pay current prices, while whales have ramped up their buying again. Current price action is still above the NVT price, which suggests that current price fluctuations are still within the expected bullish territory.
Nevertheless, the demand side should be watched closely for a potential dry-up in on-chain volume over the next few days if the price comes close to the NTV price.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Nothing here should be considered investment or trading advice. Past performance is not a guarantee of future results. Every investment and trading move involves risk. The author owns Bitcoin. You should conduct your own research when making a decision and/or consult with a financial advisor.
DOGE is Young People’s Middle Finger to the System, Says Mike Novogratz
Mike Novogratz, in a research report, stated that Dogecoin is “the most honest shitcoin”, calling it a “store of value” for young people wishing to express a “little bit of a middle finger to the system”.
Dogecoin’s Recent Price Action
DOGE has entered a steep and stunning climb during the past few months, going from mere pennies to over $0.65. Young people betting on the speculative and volatile crypto asset have made staggering amounts of money thanks to the recent insane rate of return.
Many theorize that this rise has been fueled by Tesla founder and business mogul Elon Musk, who often refers to Dogecoin on his infamous Twitter profile, tweeting in a (usually) positive manner. Oftentimes when an “Elon tweet” comes out regarding Dogecoin, it gives a nice little boost to the price.
Most recently, Elon Musk revealed that he would be hosting SNL, dropping a single hint: Dogefather. This enigmatic message has spurred thousands of young people worldwide to invest in DOGE, which, although extremely risky, has been facing undeniably bullish price action as of late. Will Elon Musk’s SNL special provide the fuel needed for DOGE to power through to over a dollar, or will it be a ‘sell the news’ event?
Novogratz Draws Parallels to GME
Novogratz, in his interview, urged people to “listen to what Dogecoin is saying”, as he sees it as very comparable to the GameStop fiasco (where a group of young retail traders pushed GME to new heights, partially in an attempt to liquidate hedge funds that were shorting the stock).
“There is nihilism and excitement to it,” Novogratz stated, adding, “there’s something really pure about it.”
Indeed, Dogecoin is not a successful ‘company’ in the traditional sense, and there is little to no innovative development work going on behind the scenes, but we’ve seen (in the stock market, for example) that the power of the masses if placed behind a single unifying idea, can work wonders.
It’s a massive game of tug of war — whether or not Dogecoin can sustain this dizzying momentum remains to be seen. One thing is for sure: millions of people will be tuning in to watch SNL this week.
Latin America’s Biggest Online Marketplace, MercadoLibre, Disclosed Bitcoin Holdings
On a financial results report dated May 5th, e-commerce giant MercadoLibre dropped the bomb. The company is the latest institution to add Bitcoin to its balance sheet. It follows MicroStrategy, Square, and Tesla’s highly covered buys. Bitcoin’s institutional adoption is in its infancy, but advancing non-stop.
In the financial highlights for 2021’s First Quarter, the company wrote a succinct:
As part of our treasury strategy this quarter we purchased $7.8 million in bitcoin, a digital asset that we are disclosing within our indefinite-lived intangible assets.
A modest allocation, considering MercadoLibre has almost $4B in assets, a cash reserve of $1.1B. It also has a market capitalization of approximately $76B. However, the move might be part of a bigger plan. The company recently opened a section on their website dedicated to real state commerce in Bitcoin and Bitcoin only. The pilot program includes 75 properties and 7 real state agencies willing to accept the cryptocurrency.
The Bitcoin-on-the-balance-sheet club
The investment puts MercadoLibre in a pretty exclusive club. The institutional adoption pioneer was MicroStrategy, a company that then issued bonds to buy even more Bitcoin. Twice. At the time, Bitcoinist reported:
Microstrategy announced today that it purchased $15 million worth of Bitcoin. The company’s CEO, Michael Saylor, tweeted this morning that his company had bought approximately 253 BTC, bringing its total holdings to about 91,579 BTC.
After that, Square announced a moderate buy of $50M worth of Bitcoin, and months later another one of $170M. It’s worth noting that the company buys and sells BTC through their flagship product CashApp. And that it keeps buying more. Six months ago, Bitcoinist reported:
Ikigai Asset Management’s Hans Hague recently noted that per his analysis, Square and Grayscale alone have accumulated $2.3 billion worth of Bitcoin in the past quarter.
The biggest player of all, of course, is Elon Musk’s Tesla. Reports that the company made more money from that investment than for selling cars are all over the Internet. In any case, Tesla made a big splash when it entered the space. Bitcoinist reported:
Traders flocked into the cryptocurrency market a day after American carmaker Tesla announced that it had purchased $1.5bn worth of Bitcoin as “alternative reserve assets” to their cash holdings.
In its filing with the Securities and Exchange Commission, Tesla said it plans to buy more Bitcoin in the future and—maybe—even enable its use as a medium of payment for its products and services.
MercadoLibre stock chart | Source: MELI on TradingView.com
More about MercadoLibre
It may not be a big name in the European and North American markets, but MercadoLibre is ubiquitous in Latin America. The company operates in:
- Costa Rica
- Dominican Republic
In the quoted financial results report, they describe themselves as:
Founded in 1999, MercadoLibre is the largest online commerce ecosystem in Latin America, serving as an integrated regional platform and as a provider of the necessary digital and technology-based tools that allow businesses and individuals to trade products and services in the region. The Company enables commerce through its marketplace platform which allows users to buy and sell in most of Latin America.
A question remains, will Bitcoin holdings make MercadoLibre’s stock rise?
Featured Image by Mark König on Unsplash - Charts: TradingView
Coinsmart. Beste Bitcoin-Börse in Europa
Novogratz’s Galaxy Digital set to acquire BitGo for $1.2B
Galaxy Digital is in the process of acquiring BitGo for $1.2 billion, which would be settled in stock and cash
Galaxy Digital, the firm owned by popular investor Mike Novogratz, is set to acquire BitGo, a leading independent digital assets infrastructure provider. The deal is worth roughly $1.2 billion and will be paid in both stock and cash.
In a press release yesterday Galaxy Digital said, “The acquisition will position Galaxy Digital as a leading global full-service platform for institutions seeking access to the crypto economy, offering an unparalleled breadth of industry-leading products and services at scale.”
Several reports surfaced last month, suggesting that the two companies are in advanced talks regarding an acquisition. Mike Novogratz, CEO and Founder of Galaxy Digital, said the acquisition of BitGo would turn his company into a one-stop-shop for institutions, boosting their efforts to institutionalise digital asset ecosystems and blockchain technology. Novogratz added, “The power of the technology, solutions, and people we will have as a result of this acquisition will unlock unique value for our clients and drive long-term growth for our combined business. We are excited to welcome Mike Belshe and the talented BitGo team to Galaxy Digital.”
Per the terms of the agreement, BitGo shareholders are set to receive 33.8 million newly issued shares of Galaxy Digital common stock. Furthermore, they will be paid $265 million in cash, which brings the total value of the deal to approximately $1.2 billion.
BitGo is one of the leading regulated custodians in the cryptocurrency sector. It currently provides services to over 150 exchanges and 400 institutional clients. BitGo controls over $40 billion in assets under management by supporting the custody of over 400 coins and tokens. BitGo CEO and Founder Mike Belshe said joining Galaxy Digital is an exciting new chapter for the company, allowing their clients to access a wide set of financial solutions.
Galaxy Digital planning to go public in the US
Galaxy Digital is a publicly-listed company in Canada. However, the firm is planning to officially list on a US stock exchange this year. In that regard, the company’s board of directors approved a proposed reorganisation and domestication designed to help the company achieve its goal of going public in the United States.
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