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This year, the cryptocurrency market has had a good start, with Bitcoin, the most valuable cryptocurrency by market capitalization, maintaining stability above $40,000.
However, whether Bitcoin is ready to sustain this momentum depends on certain technical and on-chain factors. From an on-chain perspective, the on-chain analysis platform Cryptoquant is monitoring the movements of short-term and long-term holders and how it outlines the likelihood of a price increase.
Two crucial indicators needed to understand the current state of the Bitcoin market include Realized Dominance and Realized Cap. Realized Dominance calculated using Realized Cap is essential economic data for distinguishing the wealth held by short-term participants and long-term holders. Historically, these data have proven to be practical for identifying market entry points during periods of risk. They can also be used to identify ideal conditions for understanding long-term price bottoms.
Using this data, Cryptoquant found that the current dominance or cap of Bitcoin held by short-term holders is around 35%. It is noteworthy that a decrease of 5% to 10% from the current percentage often indicates that Bitcoin's price has bottomed out.
As explained by the on-chain analysis platform,
"Typically, during market bearish periods, when the percentage of Bitcoin held by short-term holders reaches 20-25%, the price of Bitcoin tends to bottom out. Considering this concept, potential market tops are observed when short-term holders' capital reaches the peak of 70-80%."
While these indicators may not be used to calculate recent price fluctuations, Bitcoin still has strong growth potential in the long term. On the other hand, public sentiment is favorable towards Bitcoin. According to a recent report shared by Santiment, the discussion ratio of the crowd about Bitcoin is high, which is usually a sign of fear, but currently appears to be favorable for Bitcoin.
"Historically, a high ratio of people discussing Bitcoin is a sign of fear. However, since mid-2023, due to (arguably) unrealistic expectations about the market, the excitement and optimism surrounding ETFs have turned the high discussion about BTC into a greed indicator," the report stated.
As of the report's release, Bitcoin's market capitalization and trading volume are decreasing. Despite managing to stay above $40,000, the top cryptocurrency has not eliminated weekly and monthly losses.
With increasing bearish selling pressure, Bitcoin bulls must regain control to maintain the price at $42,910 at the time of writing. |
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Post time 17-2-2024 22:13:09