The cryptocurrency market was recently shaken by a flash crash of Bitcoin to $110,000. Novice investors were hit, while experienced holders see opportunities in this volatility. What's the real story? Let's dive into the data analysis.
The flash crash on August 24 was more significant than April’s, with strong liquidation of long positions. This has effectively reset the market, reducing speculative excess and offering a more solid foundation for Bitcoin.
On-chain data shows that pain is primarily being felt by new Bitcoin investors. However, holders of 1 to 6 months remain profitable, showing resilience in the face of market turbulence.
This market cleansing can be considered a positive reset where weak hands give way to stronger holders, reducing excess supply and strengthening the support.
BTC is holding just above $108,000, corresponding to the average cost basis for holders of 1 to 3 months. This is a key level to watch, as maintaining it could stabilize market sentiment.
As Bitcoin attempts to stabilize around $110,000, monitoring key support levels is essential for anticipating any deeper correction. Losing this level could open the door to more significant and prolonged corrections.
It’s crucial to understand that this current pullback can be viewed as a simple market cleansing rather than a total collapse. The next STH support sits at $103,000, then between $95,000 and $93,000.
The STH SOPR remains negative, confirming this capitulation. However, there’s still room for additional decline. Nevertheless, this primarily indicates that the bottom is closer than ever. This reinforces the potential for a bounce around $103,000 if Bitcoin’s correction continues.
Finally, the Seller Exhaustion Constant is a Bitcoin on-chain metric that identifies periods of seller exhaustion, signaling potential market bottoms. It’s calculated by multiplying the percentage of supply in profit by 30-day volatility. A low value indicates low volatility and heavy losses, often followed by a market rebound.
On the chart, we can observe a divergence between LTH and STH. The reset and transfer from strong to weak hands is therefore taking place. The probabilities of a correction deeper than $103,000 are diminishing. The support at $108,000 will therefore be crucial for the coming weeks.
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Charles Ledoux is a Bitcoin and blockchain technology specialist. A graduate of the Crypto Academy, he has been a Bitcoin miner for over a year. He has written numerous masterclasses to educate newcomers to the industry and has authored over 2,000 articles on cryptocurrency. Now, he aims to share his passion for crypto through his articles for InvestX.
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