Cautious traders fear dead-cat rally amid rising stablecoin inflows
The cryptocurrency market has seen wild volatility recently after Bitcoin (BTC) fell to $30,000 and recovered to $38,000. Confusing traders, the current price action is"dead cat bounce", the price of Bitcoin will continue to move lower, or is it a solid reversal that will set the stage for the market's next move higher.
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BTC/USDT 4-hour chart. Source: TradingView
Careful analysis of on-chain data and exchange inflows shows that the sell-off of Bitcoin has led to a downturn in the entire market. Delphi Digital analyst Nick Pappageorge emphasized that BTC flows into exchanges"Over 20,000 BTC in just one hour on Wednesday"image description
Funds flowing in from BTC exchanges. Source: Delphi Digital
Fear destabilizes markets
One of the main sources of market turmoil identified by Pappageorge is the fact that there seem to be FUD (fear, uncertainty and doubt) headlines every day, including the Chinese government’s ban on cryptocurrencies and speculation that Tesla will dump its holdings of Bitcoin. worry. These back-to-back fear-filled narratives have led retail investors to sell their bitcoins on exchanges to avoid further price declines.
Pappageorge also pointed to concerns over a hack on Binance Smart Chain, which saw the price of PancakeSwap (CAKE) and Pancake Bunny (BUNNY) plummet, with the latter having $45 million worth of user funds siphoned off, fueling market fears.
The turn in sentiment this week was driven in part by positive headlines, such as the formation of the Bitcoin Mining Council following a meeting of Elon Musk, Michael Saylor and North American Bitcoin miners, which sparked a rally in BTC and other coins. The quick reversal has thus sparked a debate as to whether the current market activity resembles a dead cat bounce or a trend reversal.
Experienced traders hoard at lower prices
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The number of bitcoin accumulation addresses. Source: Glassnode
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The BTC price oscillates around the S2F model. Source: PlanB
PlanB describes:"There are very few buying opportunities like today (Q1 2019 when I wrote the S2F article, March 2020 due to covid, and now). Life is about having choices."
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A circulating supply of stablecoins. Source: Delphi Digital
While this could be a sign that buyers of the dip are"loading ammunition", but Balakrishnan affirms that,"It could also just be stablecoin arbitrageurs", and emphasize"Ensure circulating supply does not drop dramatically to confirm these inflows will be deployed"importance.
Exchanges now have a record amount of “ammo” but at the same time, a whole new group of crypto investors who have just experienced their first 50% drawdown are now wondering if they should get out of the market Or double down on your investment. The more experienced in the crowd are betting that the market is headed higher, but further volatility is entirely guaranteed.
Compilation: Bibabu
Original: cointelegraph
Compilation: Bibabu
