The price of Bitcoin rose to $20,000 in 2017 and fell sharply. According to Glassnode, the same top sign has come up now, but it seems different this time for several reasons.
Important sign of 2017 reappears for Bitcoin, but this time it may not be relevant
In 2017, the price of Bitcoin (BTC) reached US$ 20,000 before falling rapidly. Now, the same signal from the top of the chain has resurfaced, according to Glassnode researchers. But beyond much stronger fundamentals this time, the current rally seems quite different for other reasons.
Bitcoin usually retreats when whales make a profit, causing a cascading effect on the entire cryptomorph market. Thus, when the vast majority of the market is profiting, the chances of correction increase.
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The percentage of Bitcoin UTXOs in profit.
98% of all Bitcoin addresses are now profiting
Since the March 2020 crash, when the price of Bitcoin fell below $3,600 on BitMEX, BTC has risen 260%. After such a high, a phase of consolidation or retreat may cause a healthier recovery in the medium term.
Glassnode researchers found that the last time 98% of all Bitcoin UTXOs were profitable was in December 2017. After Bitcoin peaked at $19,798 on December 16, 2017, it fell 45% in six days to $10,961.
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Bitcoin weekly price list since 2017.
At the time, many whales and retail investors made a profit, causing enormous volatility. Glassnode wrote:
„98% of all #Bitcoin UTXOs are currently making a profit. A level not seen since December 2017, and typical in previous BTC bullish markets. ”
However, there are several fundamental and technical differences between the current rally and the 2017 maximum.
First, the current Bitcoin rally has been much more stable than the 2017 parabolic increase, which happened so suddenly that no clear level of resistance and support was established.
This time Bitcoin has been rising steadily, confirming $10,500, $11,300, $12,000 and $12,500 as key support levels.
Secondly, institutional and overall demand is high in relation to the volume coming from the derivatives market.
After the high profile allocations from Square, MicroStrategy and Stone Ridge in Bitcoin, the volume of platforms focused on institutions has increased. LMAX Digital, CME and Bakkt specifically saw a significant increase in commercial activity since August.
OTC market also grows
When miners, whales and high net worth traders buy and sell Bitcoin, they usually depend on the OTC market.
The OTC market allows large trades to be combined with minimal slippage, which could trigger large price fluctuations in exchanges.
Professional traders increased short positions when Bitcoin price exceeded $12,000, show data
The consistent increase in over-the-counter trading suggests that the appetite for BTC of large investors and institutions is likely to increase. Analysts from on-chain data provider CryptoQuant said:
„To see how many OTC trades are in progress, you can look at the Fund Flow Ratio. The 30-day moving average has reached a minimum of 2 years. Large portfolios are coming out of the exchanges. Paypal news may just be the beginning“.
The combination of high volume, a stable uptrend and increasing volumes of OTC make new entries to the Bitcoin market more likely. If the trend is maintained, it can compensate for possible declines in profit realization in the cryptomino market.