Bitcoin (BTC) price could drop by 20% in the next few months, but that hasn’t stopped rich investors from hoarding.
Glassnode data showed that the amount of Bitcoin held by “unique entities” with a balance of at least 1,000 BTC, or so-called “whales,” has increased to its best level since September 2021.
Interestingly, last week the number grew despite the bitcoin price dropping from $43,000 to around $38,000.
Marcus Sotirio, an analyst at GlobalBlock, a UK-based digital asset broker, took the latest Bitcoin whale rally as a bullish sign, pointing to a similar move in September 2021 that preceded BTC’s all-time high of $69,000 in November 2021.
“Since whales have a significant impact on the market, this metric is an important one to note,” he said.
Bitcoin is at risk of further decline
Bitcoin’s price has fallen from $69,000 in November last year to nearly $40,000 in late April 2022, primarily due to the Federal Reserve’s decision to aggressively raise interest rates and scrap its quantitative easing program to tame inflation.
Interestingly, the decline of bitcoin mirrored similar downward moves in the US stock market, where its correlation with the tech-heavy Nasdaq Composite reached 0.99 in mid-April. An efficiency reading of 1 shows that the two origins move in perfect tandem.
“You should think of this high correlation as a gravitational field dragging the price of bitcoin,” says Nick, an analyst at data resource Ecoinometrics. He adds:
“If the Fed shoots the stock market into a black hole, don’t expect Bitcoin to survive a major crash.”
Technicians agree with basic depressive indicators. Notably, Bitcoin has collapsed from a “bear flag” pattern and risks facing further price declines in the coming months, as shown in the chart below.
The bear flag’s downside target is below $33,000.
Meanwhile, Brett Sevling, investment advisor at Gerber Kawasaki Wealth and Investment Management, says a breakout below $30,000 would open the door to a crash of up to $20,000.
All eyes are on the Federal Reserve
Sotiriou remains bullish in the long-term on Bitcoin, noting that the 1.4% contraction in US GDP in the first quarter of 2022 could prompt the Fed to become less hawkish to avoid a recession.
“As long as we see these macroeconomic headwinds continuing, I think the correlation with the Nasdaq will continue,” the analyst told Cointelegraph.
“However, the longer this consolidation lasts, the larger the expansion will be when the Fed reverses course from hawkish to pessimistic.”
The potential for Bitcoin’s “unequal returns”
Meanwhile, Nick believes that Bitcoin will recover faster than US stocks after the next big drop in the market.
Related Topics: BTC and ETH Will Break All-Time Highs in 2022 – Celsius CEO
The analyst explained by pitting the volume and duration of BTC withdrawals – a correction period between all-time highs – against tech stocks including Netflix, Meta, Apple and others.
Notably, bitcoin recovered faster than US stocks given each time.
“Bitcoin doesn’t look much different from a normal equity investment. So don’t worry too much about volatility and focus instead on the long-term growth potential. Those who bet on uneven returns will be rewarded in time.”
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