Long-term investors are keeping their hands strong during the recent decline in Bitcoin price
Long-term investors are still holding onto BTC despite the sharp drop on September 7. Furthermore, we continue to see a deepening supply shock as the amount of BTC on exchanges decreases. At press time, Bitcoin price is changing hands at $45,589.
BTC/USD 4-hour chart | Source: TradingView
Investors buy Bitcoin price dip as supply shock intensifies
The growth of the Bitcoin network is illustrated by the number of addresses holding various values of BTC, most of which increased during the recent decline. On-chain data confirms that overpaid derivatives traders mainly triggered the recent massive price move.
Last week, Bitcoin reached a local peak at $52,956, just above the 0.618 Fib retracement level on September 7. On the same day, a flash crash took the BTC price to a low at $42,900. One of the reasons for the 19% decline was the clearing of long leveraged positions, which experienced liquidations totaling $4 billion.
Shortly after the sharp decline, the price rebounded and is currently trying to recover around $46,000. Despite the short-term rebound, technical indicators on higher intervals are starting to give bearish readings.
On-chain analytics data can help explain how investors behaved during the sharp decline. It turns out that many investors holding actual BTC did not show significant movements during the flash crash.
BTC flash crashes are caused by deleveraging, the COVID crash was similar in that derivatives overreacted, but back then, it was supported by investors. This one was completely divergent and a mystery. The intensifying supply shock supports this on multiple levels: stock market outflows and short- and long-term investor positions. The effect of the decline is merely cheap coins.
However, long-term investors were unshaken by the drop and increased their holdings. The long-term outlook highlighted is evident in the chart of the balance of Bitcoin held on cryptocurrency exchanges. It turns out that the amount of BTC on exchanges has been steadily declining since the COVID-19 crisis (red circle).
BTC balance on exchanges | Source: Glassnode
There has been a significant increase in the amount of BTC twice. The first was when BTC rallied in July 2020 and especially during the recent drop in May 2021. Furthermore, the amount of BTC available on exchanges has just hit a 3-year low. The last time exchanges recorded such a low supply was in late August 2018 (green circle), with Bitcoin trading at around $7,000.
As AZCoin News reported, finally, it is worth noting that regardless of the amount of BTC held, the overall number of addresses is not decreasing. This shows the solid organic growth of the network and, through the continued increase in the number of small addresses, the growing distribution of the coins.
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