Bitcoin on Coinbase declined 36% since all-time-high, here’s what could come next

Are we in for a crash like the one hitting the crypto market two years ago? There’s certainly no shortage of storm clouds on the horizon. The uncertainty associated with the many macro- and geopolitical risks has weakened shorter-term on-chain accumulation trends since January, according to on-chain analysts Glassnode.

In their latest report, Glassnode see elevated spending by older coins the past week, however marginal, it is still not suggestive of any widespread loss of investor conviction on a macro scale.

The potential for a March 2020 event is there

“With over 2.51 million Bitcoin held by short-term holders at an unrealised loss, there remains a risk that sellers have not yet been fully exhausted. The “potential energy” for a capitulation event [like the one in March 2020] is there, and such an event would be consistent with all prior bear cycles,” the report reads.

“Bitcoin accumulation trends have softened in the short term, despite extremely constructive long-term demand trends. The potential energy for a capitulation event is in place, but is yet to manifest as it has in previous market cycles,” the report continues.

The past week, bitcoin prices have continued to consolidate, compressing the leading cryptocurrency by market cap into an increasingly tight range between a low of about $37,200, and a high of $42,400. The market currently exists in a delicate balance, amidst a backdrop of high macro and geopolitical uncertainty playing out on the global stage.

At press time, bitcoin is trading at $38,730 and the price has been pretty flat over the past few days. Bitcoin is down a marginal 0.2% on the daily, and up 1.7% on the week. Zooming out, bitcoin is down 43.7% since the all-time high at $69,044 set on the 10th of November last year.

Ether follows bitcoin like a shadow

Meanwhile, Ethereum, the second cryptocurrency by market cap, is following its bigger brother. At the moment of writing, ether trades at $2,536 which means the coin is down 1.6% the past day but is up 1.4% on the week.

The general trend, according to Glassnodes report, seems to be a mix of both weaker short-term holders, at the same time as total supply held by long-term Holders is near all-time-highs, despite a slight increase in spending by long-term holders. Coins older than six months represented 5% of all spending volume the past week, which is a notable uptick from recent months. This increase in spending by long-term holders, however, is still not at levels that signify widespread fear or loss of conviction.

“Despite weaker short-term demand, holding remains the preferred strategy, with the proportion of younger coins now at all-time-lows. This is historically associated with late-stage bear markets. Long-term Holders are adding to their balance at a volume 7.6x larger than mining issuance. This is constructive longer-term,” the report reads.

Coinbase’s massive outflow is part of a long-term trend

When looking for signals of longer-range demand, Glassnode’s report points at the American crypto exchange Coinbase as an example as a long-term trend of outflows from the exchange since the March 2020 crash suggests that investors increasingly see bitcoin as a relevant asset in modern portfolios and that this further supports the adoption of Bitcoin as a macro asset by larger institutions.

Coinbase saw a very large net outflow last week, as reported by CryptoSlate. The outflow totalling 31,130 BTC (appr. $1.18 billion) is the largest net outflow since 28-July-2017.

“This outflow has dropped the total balance held on Coinbase to 649,500 BTC, bringing it back to levels last seen at the 2017 bull market top. The total BTC balance held by Coinbase has now declined by 375,500 BTC, or 36.6%, from the all-time high reached in April 2020. Large outflows like this one are actually part of a consistent trend in the Coinbase balance, which has been stair-stepping downwards over the last two years,” the report reads.

Despite struggling prices, demand is present

Furthermore, the significant uptick of outflows the past week suggests these withdrawn BTC have been moved to a wallet with little-to-no history of spending. As per the report, this metric will trend higher as more coins move into such wallets.

This currently has a similar market structure to the 2018-20 bear market, albeit on a shorter time scale, and the amount of supply held in illiquid wallets is 3.2 times larger than liquid and highly liquid supply combined. This metric does indicate that a persistent demand is present, despite struggling prices.

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