However, more inexperienced investors have become long-term Bitcoin holders, limiting sell-side risks to less than $30,000. According to on-chain analyst Willy Woo, Bitcoin (BTC) could experience one last bear market capitulation if “whales” — addresses that hold more than $1 million in Bitcoin — increase their selling pressure.
Woo calculated the average price at which short-term investors entered the Bitcoin market throughout history and plotted the daily value change. It resulted in a cost basis, which is a metric that indicates when “inexperienced” traders sell BTC to “experienced” traders during a BTC free fall, which usually coincides with the market bottom.
The chart below shows that the cost basis experienced significant drops during previous bear markets before solid accumulation. Surprisingly, Bitcoin’s ongoing correction — from $69,000 in November 2021 to around $39,000 in March 2022 — has not resulted in a significant drop in the currency’s cost basis.
Woo’s prediction appeared to be in line with growing speculation about Bitcoin’s next significant drop. For example, Christopher Yates, editor at AcheronInsights, predicted that Bitcoin’s price could fall to $30,000 due to the “deteriorating macroenvironment.”
Ecoinometrics, a data resource, provided evidence of the demand gap between small and wealthy Bitcoin investors in its most recent weekly report. It noted, for example, that addresses holding up to 10 BTC have been accumulating the coins over the last 30 days.
Meanwhile, another metric known as the “LTH Inflation/Deflation ratio,” according to ARK Invest on-chain analyst David Puell, corroborates the theory above.
In detail, Bitcoin inflation indicates that LTH is releasing their BTC faster than the natural sell-side of miners. Deflation, on the other hand, implies that LTHs have absorbed a proportional amount of the miner sell-side every day, in addition to the outstanding total supply.
The attached chart depicts the LTH Inflation ratio, with periods of inflationary outcomes flashed in red and deflationary readings flashed in green.
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