Glassnode Remains Bullish on Bitcoin Despite Recent 20% Drop

Key Insights:

• Despite a 20% drop, Bitcoin’s macro uptrend remains resilient, with increasing liquidity and reduced volatility signaling market maturity.
• Institutional interest surges as whales accumulate Bitcoin, highlighting confidence in its long-term value even amid price corrections.
• European regulatory approval and macroeconomic factors like inflation concerns boost Bitcoin’s appeal as a haven asset.

Bitcoin has experienced a correction, falling over 20% from its all-time high of around $74,000, which reached March 2023. Despite this decline, analysts at Glassnode remain optimistic about the cryptocurrency’s long-term prospects.

Glassnode analysts point out that Bitcoin’s macro uptrend is still among the most resilient in its history. Despite recent corrections, these downturns have been relatively shallow, indicating a maturing market. The increase in liquidity and the subsequent reduction in volatility are seen as positive signs for Bitcoin’s stability and potential growth.

The recent price correction saw Bitcoin struggle to maintain its upward trajectory. The current support level is around $60,000, and a critical reaction level is at $56,500. On the upside, a recovery that breaks above $66,000 could lead to a rally past $72,000 and even $74,000.

Institutional Interest and Whale Accumulation

Confidence in Bitcoin remains high among institutional investors and large holders, commonly referred to as whales. On-chain data indicates that one whale has capitalized on the price dip, purchasing over 100 BTC in the last week alone, bringing their total acquisitions for the month to over 7,257 BTC. This suggests a belief that Bitcoin, even at multi-year highs, may still be undervalued.

In addition to individual whale activity, institutional interest in Bitcoin is growing. Former U.S. President Donald Trump’s acceptance of cryptocurrency donations for his campaign has been seen as a bullish signal, marking a shift in stance. European regulators are also considering approving Bitcoin as an investable asset within UCITS funds, potentially unlocking billions in institutional investments.

Macro Economic Factors Favoring Bitcoin

Several macroeconomic factors are also working in Bitcoin’s favor. The rising M2 money supply in the United States, coupled with concerns about high inflation, is driving demand for Bitcoin as a hedge. Like gold, Bitcoin is considered a haven asset due to its deflationary design, which limits its supply.

Banks such as Morgan Stanley and BNP Paribas are exploring ways for their clients to invest in Bitcoin, reflecting the growing acceptance of the cryptocurrency among traditional financial institutions.

Decline in On-Chain Activity: A Cause for Concern?

While Bitcoin’s price has been relatively stable, its on-chain activity has slowed significantly. Data from Santiment indicates that transaction volume, daily active addresses, and whale transaction counts are nearing historic lows. This reduction in on-chain activity, reaching levels not seen since 2019, reflects a cautious sentiment among investors.

Santiment defines transaction volume as the total amount of coins transacted within a given timeframe. The drop in transaction volume to its lowest point in the past decade, along with the reduction in daily active addresses, indicates reduced participation in the Bitcoin network. Whale transactions (over $100,000) have also declined to their lowest since late 2018.

Market Sentiment and Price Stability

Despite the slowdown in on-chain activity, Santiment suggests this trend does not necessarily predict further price declines. Instead, it reflects a period of “crowd fear and indecision” among traders, which has historically not always led to significant price drops.

At press time, Bitcoin’s price remained just above $61,167, showing a slight increase of 1.06% in the past day, according to CoinMarketCap data. While this price consolidation has caused some concern among investors, the overall market sentiment remains cautiously optimistic.

BTC/USD 1-day price chart (Source: CoinMarketCap)

The future outlook for Bitcoin hinges on several key factors. Institutional interest and regulatory developments will play crucial roles in shaping Bitcoin’s trajectory. The acceptance of Bitcoin as an investable asset by European regulators, in particular, could lead to substantial inflows from institutional investors.

Additionally, macroeconomic conditions such as inflation concerns and the rising money supply in the United States are likely to continue driving demand for Bitcoin as a hedge. The behavior of large holders and whales, who have been accumulating Bitcoin during the recent price dip, also suggests a bullish outlook in the long term.

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