Factors Why Bitcoin plunging to 50% in March is unlikely to Happen Again

Piyasi Mitra
Piyasi Mitra is a journalist, features writer and copy editor who has worked with The Times of India and the ABP Group, and is currently exploring content creation in the digital space.
  • Bitcoin has sharply declined from around $12,050 to as low as $9,875 in a span of five days
  • Over 61% of Bitcoin’s supply lay in the hands of whales, which are wallet addresses with more than 100 BTC.

Bitcoin has sharply declined from around $12,050 to as low as $9,875 in a span of five days, and investors have once again started to fret about the fate of the king of cryptocurrencies. In contrast to March, the numero uno cryptocurrency’s market infrastructure remains in a bullish mode. Regardless of market conditions, will Bitcoin’s 50% price plunge in March strike again? In a big relief, report findings and expert analysis reveal it is quite unlikely.

High on Whales

At the time of writing this article, over 61% of Bitcoin’s supply lay in the hands of whales, which are wallet addresses with more than 100 BTC. This is a significantly high percentage, with just over 14% of the supply being controlled by smaller addresses with less than 10 BTC. Whales, or large holders, tend to mark tops and bottoms because they look for significant liquidity. For instance, data from Whalemap reveals that a whale who purchased nearly 9,000 BTC in 2018 took profit at $12,000. The whale held onto the Bitcoin and took profit after two years, hittings a local top. Crypto analyst Cole Garner has shared a chart that showed Bitfinex traders are bidding $8,800. According to the analyst, since smart money has their bids sitting at $8,800, the bottom will likely be around there.

$10,000 Up For The Longest Period Since 2017

As per a Forbes analysis, Bitcoin has been above $10,000 for the longest period since 2017, which suggests that many buyers aggressively protected the $10,000 area. The report further points that less than two months ago, the high-$9,000 region acted as a huge resistance area that caused BTC to drop sharply. Now, it has turned into a strong support region, especially one which could serve as a strong foundation for the medium term.

March was a Black-Swan Event

Most experts were unprepared for the sub-$3,600 drop of Bitcoin in March and rather regard it as a black- swan event. At the initial phase of Covid 19, most forms of asset such as Bitcoin , stocks, gold, silver, and other legacy markets witnessed a dip in value, but eventually managed to recover with passage of time.

The Forbes report further analyses that the only reason Bitcoin dropped to $3,600 in March was due to an unprecedented cascade of liquidations, in which  $1 billion plus were liquidated in futures contracts, mostly on BitMEX.

Corroborating the findings, Coinbase explained that cascading liquidations were most prominent on BitMEX, which offers highly leveraged products. It wasn’t until BitMEX went down for maintenance at peak volatility that the cascading liquidations were paused, and the price promptly rebounded. However, Bitcoin had briefly spiked below $4000 back then, and was trading around the mid $5000s.

Holders vs Speculators

The market sentiments can be best summed up with the findings of a Grayscale report, which says an increase in holders is considered “likely bullish,” while an increase in speculators is “likely bearish’’. Simply put, market is positive if more investors appear to be holding the cryptocurrency for the long term, in contrast to those who merely appear to be in it for a quick volatility ride. Thankfully, the chart shows holders increasing and speculators decreasing at present. Interestingly, the current market composition resembles that of early 2016, right before Bitcoin went on a bull run toward its all-time high around $20,000.

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