Bitcoin, Ethereum, Cardano, Solana, and other cryptocurrencies continue to be betwixt and between as prospects of an aggressive Federal Reserve policy tightening among other drawbacks continue to hang on them for the better part of the quarter.
A sharp decline in crypto prices has left market participants speculating if this is a trend reversal or a pullback within the larger macro-trend.
Since tapping an all-time high in early November, Bitcoin has been on a downward spiral, giving back roughly 52% of 2021’s entire gains after falling to a six-month low of $33,000 last week, a factor that has been coupled with a rise in activity addresses especially after the price fell below $54,000. On-chain data however reveals a loss in this momentum, signaling a reverse in price, only that it could take longer.
Slowed Network Activity
According to a recent report by Kraken, long-term holder accumulation which was witnessed beginning July’s lows seems to have slowed briefly after the November peak sell-off. This has been evidenced by the drop in coins held by short-term traders (less than 6 months) to an all-time low of 23.66%, meaning that these coins are being hoarded by hodlers.
The level of on-chain activity has also slowed down on Bitcoin and Ethereum by a -8.4% and -16% drop respectively since November highs, a factor that strongly “supports the strong holding sentiment represented in BTC’s HODL Waves.”
The last time such slowed activity occurred was in June as price cooled down after a three-month-long sell-off following China’s ban in March. The aftermath of that slowdown was a sustained bull run that saw Bitcoin climb into positive territory thanks to a surge in institutional and retail investments.
Bull Run or Hopium?
However, despite the weakness and subsequent slowdown, Kraken analysts believe that the multi-year bull run is not over. With the March- June retracement still towering over the current one, on-chain metrics already show that price is in the oversold region, despite a significant number of traders being in the loss, signaling a rebound.
“Market Value to Realized Value MVRV Z-score shows that the crypto asset is now in “oversold” territory, where it historically has struggled to remain for long periods before a bounce in prices.”
That said, while some traders believe that it might take a little longer compared to previous pullbacks, for the price to rebound, they expect the bull run to resume.
According to Will Clemente, a lead Insights Analyst at BlockWareTeam, “it is hard to think asymmetry is to the downside.” To him, the fundamentals of Bitcoin significantly outweigh its current price weakness which is being caused by risk-off behavior.