Earlier this week, over 231k Bitcoin [around $2.54 Bln] & around 3.5 Mln Ethereum [around $1.05 Bln] acquiring profit of over 25% were sent, consistent with the latest market intel report by blockchain analytics firm Chainalysis.
This is a bull market, one where the king coin is priced at over $11,500 USD [Its highest price since Aug last year] and up by over 70% year-to-date, while recouping over 200% of its value since falling to $3,800 earlier in the month of March this year. An equivalent market also saw Ethereum [ETH] surging to a two-year high. Thus the question arises – can the market recover from such a sell-off?
Firstly, the belief of profit is merely natural. If any asset typically surges by 25%, investors, who aren’t ‘typical hodlers,’ generally look to liquidate their holdings. Some reinvest it back within the asset which saw them achieve such gains, while others diversify or spend. Either way, the report doesn’t mention what course this ‘sell-off’ has taken i.e. either reinvesting, diversification, or another route, but only mentions that a sell-off has ensued.
It should even be noted here that the report says that the respective crypto assets were “sent,” but doesn’t mention a destination for the same. Since the report adds that this ‘sending’ of Bitcoin and Ethereum was to “realize the gains,” it’s likely that the cryptocurrencies were sent for liquidation, either via exchanges or any other avenues. Adhering to an equivalent, data from Chainalysis revealed that Bitcoin inflow into exchanges was 7.4 Mln BTC in August, above the 90-day average.
This surge to liquidate holdings is somewhat similar to the levels of February 2020, a time when Bitcoin [BTC] surged over $10k for the primary time within the year. However, a month after this move up, it dropped under $4,000 USD, more so due to the stock exchange crash and its aftereffects on the Bitcoin market. The report added that the drop between the $10k surge and therefore the mid-March crash was mainly due to the ‘market absorption.’
“This might be a similar amount as was sent in mid-February 2020 when prices were last sustained at the present profitable levels. Prices fell after mid-February, likely, in part, as the market absorbed this extra supply.”
Given this historic data and therefore the fact that the worth had not over risen over its February 2020 levels, but is now sustaining above it, the concern is will the market absorb such an excessive supply? Looking back at 2017, the report stated that the quantity of ‘profit-taking’ within the Bitcoin markets, supported the price surge, is “relatively low.”
Compared to Bitcoin’s previous five-figures surges, earlier in December 2017 and July 2019, a larger amount of Bitcoin might be sold to maintain the price, however, the market isn’t at such a level of demand yet.