Bitcoin (BTC)


After trading between $35,000 and $48,000 since the beginning of the year, the price of the digital currency has headed south and with force. In the space of a month and a half, bitcoin has shed 30% of its capitalization taking the entire cryptocurrency market with it. This had not happened since 2014, the BTC shows six consecutive weeks of decline thus leaving little and little hope of a sustainable bullish recovery on the queen of cryptos. Are these movements reflected in the behavior of investors on the network? Focus on Bitcoin.

Profit taking in free fall

Bitcoin profit taking (seven-day average)
Source: Glassnode

Profit taking is relatively low compared to what we've seen in the past. While we used to see daily peaks of over $2 billion in profit taking, we are currently below the $500 million mark. This suggests that investors who acquired bitcoin below the current price ($33,500) are not currently taking profit on these levels. But it may also suggest that much of the profit has already been made on the previous spikes in the bitcoin price at the beginning and end of last year. What about loss-leader sales?

Loss selling is back on the rise.

Bitcoin loss making (seven day average)
Source: Glassnode

Contrary to the previous chart, there has been a tendency for losses to increase since the beginning of April. Looking at the chart above, we see that we are on rather high levels on average. In fact, sales at a loss dominate profit taking, evaporating almost $750 million daily (compared to less than $500 million for profit taking). This situation suggests a certain distrust and weariness of players who have positioned themselves on higher price levels than the current price. But the bitcoins that are still in circulation on the network are also at obscure levels.

Percentage of bitcoins in profit on the network

Percentage of Bitcoins in Profit on the Bitcoin Network
Source: Glassnode

About 60% of all Bitcoins are in profit on current levels. The last time this happened was in 2020 just after the Covid crash. One bitcoin was equivalent to just over $7,000 at that time. We are at the same stage now, but with one bitcoin hovering around $33,500. This reflects the incredibly large number of bitcoins that have been acquired between the Covid crash and today. Logically if 60% of bitcoins are in profit, 40% are in loss. Out of 19 million bitcoins in circulation in total, 11,400,000 bitcoins are in profit and 7,600,000 are in loss at the moment. But who is taking advantage of the situation? Let's take a look at the behavior of addresses that hold more than 1000 BTC in their wallet.
Smart money is on its way out

Number of addresses holding at least 1000 BTC in wallet
Source: Glassnode

After seeing a long and slow decline in addresses holding Bitcoin since the beginning of 2021, the last few weeks have seen another powerful rise in the number of addresses holding at least 1000 BTC (at today's price the equivalent of $33 million). Let's move up a grade to see if addresses holding at least 10,000 BTC (at the current price of $335 million) show the same trend.

The return of the whales

Number of addresses holding at least 10,000 BTC
Source: Glassnode

Here too, the number of addresses holding at least 10,000 BTC has increased in recent weeks. This phenomenon reflects an accumulation of the supply of bitcoins from the "smart money" by taking advantage of low prices during the panic selling of young speculators. We observe a behavior finally well known to traditional finance. During periods of bullish euphoria, investors with lots of experience and solid market knowledge take profits on price spikes while young speculators scramble to take advantage of the crypto bullish frenzy. During periods of capitulation, old hands buy bitcoins from panicked speculators putting their losing BTC back into the hands of the smart money.

You might think that all you have to do is simply follow the movements of the old hands by replicating their trades. However, the demons of greed and FOMO (Fear Of Missing Out) shake investors when the markets take off.

Before we conclude, let's take a look finally, at the "Fear and Greed Index Crypto" which represents the index of fear and greed in the crypto assets market.

Fear dominates

Fear and Greed Index Crypto
Source: Alternative.me

On the graph above we find, on the x-axis, the four-year history of the index, and on the y-axis, the values from 0 to 100 of the index. 100 being considered extreme greed (values close to 100 coincide relatively well with peaks in the price of bitcoin or strong upward price rallies) and 0 as extreme fear (values close to 0 coincide relatively well with troughs in the price of bitcoin or strong price falls). It is clear that the vast majority of market participants are in stages of extreme fear today. And as we saw earlier, some are taking advantage of this situation.

The bottom line is that selling at a loss is currently dominating profit taking. The six consecutive weeks of decline are playing on the morale of crypto-investors against the backdrop of a very tense political-economic environment. In this situation, some investors seem to be putting their loss-making bitcoins back on the market while others are taking profits. An increase in the number of addresses with large amounts of bitcoins does not indicate that a market low has been found. Rather, it indicates that from current prices, smart money is once again beginning to accumulate BTC, perhaps considering that Bitcoin is beginning to be undervalued. But prices may continue to fall and these old investors will likely continue to accumulate as speculators capitulate.