Bitcoin’s $ 64,000 decline is on par with Black Thursday, but Coinbase’s outflows suggest an accumulation
The ongoing Bitcoin price correction draws a comparison with the crash in March 2020 – with one big difference.
Elon Musk and COVID-19 have something in common: They panicked both investors – at least once – into selling their Bitcoin (BTC) holdings.
The similarities have been higher in the past six days as Musk doubled its havoc perspective on Bitcoin. The billionaire entrepreneur chatted with top cryptocurrency proponents, including podcaster Peter McCormick, on Twitter over the weekend when he projected his favorite token, Dogecoin (DOGE), as superior to Bitcoin.
At some point, Musk almost admitted he was going to let Tesla offload the $ 1.5 billion investment it made in Bitcoin in February. Meanwhile, bids on the flagship cryptocurrency continued to decline with every tweet from Musk. First they rose to $ 50,000, then below $ 45,000, and finally to a low near $ 42,000.
Musk later made it clear that Tesla did not dump its Bitcoin holdings.
But its clarification did little to offset Bitcoin’s downward slant. The cryptocurrency eventually widened its bearish correction to more than 35%, measured from its all-time high of nearly $ 65,000.
This was also one of the fastest and deepest top-to-bottom retracement moves in cryptocurrency’s recent history, with on-chain indicators showing that its impact on market distortion was just as bad as that of the Black Thursday crash in March 2020 caused in the course of the coronavirus pandemic.
Meanwhile, blockchain analytics platform Glassnode reported a drop in profits from Bitcoin’s circulating supply through its proprietary metric.
The “BTC Percent Supply in Profit (7d MA)” showed a value close to 81.122 in London on Tuesday morning, the lowest level since October 2020. The values were also weak during the crash in March 2020, in which Bitcoin fell by more than 50% .
Percentage of the circulating supply of profit over an average period of 7 days. Source: Glassnode
Other on-chain indicators point to similar readings between the current Musk-led Bitcoin price crash and the one that occurred amid the coronavirus panic in March 2020.
For example, the Bitcoin transfer volume tracker at Glassnode showed an increase in BTC inflow across all exchanges. Its extent was comparable to the inflows during the sale in March 2020 and the distribution through the PlusToken Ponzi program in 2019.
Bitcoin net transfer volume to / from crypto exchanges. Source: Glassnode
A higher BTC inflow indicates a higher likelihood that traders will sell these tokens for other assets, including fiat and altcoins. Conversely, a higher outflow shows traders willingness to hold BTC for longer periods of time.
Institutional versus retail sentiment
Glassnode’s bitcoin transfer volume data, meanwhile, offered two strong investment prospects between retailers and institutions. In its weekly newsletter, the analytics platform has broken down its observation based on the inflow and outflow data collected from two of the world’s largest cryptocurrency exchanges: Binance and Coinbase.
Binance is a non-US company that primarily attracts retailers and investors around the world. Meanwhile, Coinbase’s reputation is higher among US-based institutional investors. Glassnode found that Binance was the largest recipient of bitcoin inflows during the Musk-led market crash.
“This is another indication that recent inflows are likely to be driven into other crypto assets by both new entrants (panic sellers) and possibly capital rotation,” Glassnode wrote in a weekly release.
Ki Young Ju, CEO of CryptoQuant – a South Korea-based blockchain analytics platform – also noted that most of the BTC inflows went to Binance, adding that it wasn’t necessarily a bearish signal.
“I’ll wait for the influx signal to cool down,” he added nonetheless.
Bitcoin net transfer volume from / to Binance. Source: Glassnode
On the flip side, Coinbase has seen higher new bitcoin outflows since the cryptocurrency crossed the $ 20,000 milestone last year. The trend continued this week and showed that institutional investors absorbed the selling pressure of the retail market.
In other words, wealthy investors bought Bitcoin at local lows, while average investors sold it under the influence of Musk.
“Don’t listen to what they say,” said early-stage investor Anthony Pompliano in his customer announcement on Monday. He added:
“Just watch what you do with your money. Elon Musk and Tesla know that they will be dependent on the further development of Bitcoin. It wouldn’t surprise me if they actually buy more bitcoin at low prices now, or at least plan to buy more in the future. “
Pompliano added that Bitcoin remains the best performing macro asset, a “front runner” with stocks, bonds, real estate and commodities far outperformed. Twitter CEO Jack Dorsey, whose payment company Square added Bitcoin to its balance sheet to overcome inflation fears, also stated on Friday that his team would “work forever” to make Bitcoin better.
The comments were in contrast to Musk’s support for Dogecoin. Veteran investor Paul Santos wrote in his Seeking Alpha article that the Tesla CEO may want to make money out of nothing by exploiting what is known as the cryptocurrency euphoria.