Blockchain Analytics of a Price Recovery – IntoTheBlock
Last week, we published some data points about the recent drop in the price of Bitcoin and other crypto assets. Since then, crypto markets have experienced a bit of a recovery so it might be a good idea to review some data points with this new perspective. The overall consensus in the crypto community is that the unconfirmed rumors around the position of the Chinese government related to different crypto companies (including the polemic news about the Binance office raid) have placed a level of pressure in the top crypto assets in the market. Some of those theories play well for media headlines but what does the data says? We took a look at some of IntoTheBlock’s blockchain indicators with a specific focus on some of the exchanges(including Binance) and the insights were very revealing.
If there is a word that I would use to describe the recent Bitcoin price drop would be overextrapolation.
In behavioral finance, the term overextrapolation is often used to describe the excessive projection of recent experience such as a price drop or the interpretation of specific news. A classic example of overextrapolation are studies from financial economists that have shown that investor expectations for future stock returns in the next year are highly correlated with returns in the past year. The recent price drop and small recovery of Bitcoin seems like a case of overextrapolation. Many media outlets were linking the rumors coming out of China with previous crackdowns of the Chinese government in the crypto industry in recent years. As a result, the negative sentiment in the market might have been accentuated as a result of overextrapolation.
But let’s look at some interesting datapoints about the current situation of Bitcoin and the changes in the last week.
What’s does the current on-chain metrics of Bitcoin tells us about the stagte of the cryptocurrency. We took a look at some key indicators to see if they hinted any patterns in the recent price drop and recovery. Considering that a lot of the macro-explanations of the recent price decline were related to crypto exchanges, we put a specific emphasis reviewing IntoTheblock’s exchange intelligence indicators. The findings are quite interesting.
1)Small Resistance Levels at $7800 but Massive at $8200
IntoTheBlock’s In-Out Money analysis shows a small cluster of less than 500,000 addresses that are holding Bitcoin at an average price of $7740. If Bitcoin gets past that level, the next resistance cluster at $8270 seems way more complicated as it includes over three million addresses. Complementary, support seems very strong at $7000.
Published at Fri, 29 Nov 2019 14:56:05 +0000
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