Concerns that a new strain of the coronavirus could bring further economic lockdowns to the global economy caused markets to sell off across the board last weekend.
U.S. stocks opened sharply lower, with the S&P 500 down 2.36%.
The VIX, a volatility index commonly used as a gauge of financial market stability, surged intraday to 28.5.
In the commodities sector, with global economic slowdown and stagnation being a concern, WTI (West Texas Intermediate) crude oil fell intraday by 12.48%.
As various macro asset classes broadly reacted, Bitcoin also fell sharply. This macro retreat, particularly for risk-on assets, has driven Bitcoin's price down 21% from its all-time high.
For many long-term holders, the decline from Bitcoin’s all-time high is already priced in, and the current price movement is close to the average decline rate for this year.
For reference, while the average price drop from the all-time high is 49%, Bitcoin’s volatility this year has not yet reached that figure.
Currently, Bitcoin’s price sits just above the short-term holder cost basis, a key support level.
About a quarter of Bitcoin’s supply is trading above $50,000, indicating demand at this psychological level is rising and prices are moving higher. However, if the price begins to fall below the short-term holder cost basis of $53,244, the available supply to support the Bitcoin price diminishes.
This is an important price region to watch over the coming days. Also note that the largest on-chain support area is above $47,000.
Looking at several on-chain holder metrics, it’s clear investors are taking defensive positions. The supply held by long-term holders has declined, increasing by 76,633 BTC compared with the previous day.
Similarly, looking at the CDD (coins moved by long-term holders for any reason), 40.8 million coins moved in one day, showing a large spike in a single day.
There is some variability in this indicator, but there’s no doubt a notable number of coins moved. This can be seen as a kind of profit-taking movement.
Although not all on-chain UTXOs spent are for “economic selling,” the overall trend shows that the days moved is a significant signal, and despite the recent large spike, Bitcoin remains in an accumulation phase when looking at a 90-day rolling sum.
Additionally, despite the recent downtrend, compared to this summer, long-term holders remain plentiful, indicating continued accumulation.
｜Summary
Despite the recent decline in price action, the medium- to long-term outlook remains bullish.
In this context, the recent volatility and price movements suggest that excessive leverage should be avoided by many market participants.
The worst situation for a market participant is to lose everything due to excessive leverage or risk-taking, even if their investment approach aligns 100% with their actions.
With the ups and downs this time, those who reduced leveraged exposure should reassess overly aggressive trading and, even amid high volatility, trade with a position size capable of absorbing such moves.
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