After the cryptocurrency market saw its market capitalization drop by over $400 billion in a wide sell-off that saw the price of the flagship cryptocurrency Bitcoin drop to a $53,000 low before it started recovering, some analysts are suggesting the drop may be a good entry point.
Adam Back, CEO of Blockstream, took to social media to remind his followers to “zoom out” and noted that prior Bitcoin bull runs had “half a dozen2 drawdowns of around 30%, with the recent drop being of roughly 27%.
He added that the drawdown even appears to be “less deep,” but noted “people forget the normal bull market pattern” and reminded his followers not to panic, advising them instead to “buy the dip.”
reminder, zoom out. prior bull runs had half a dozen -30% draw downs too. we're at about -26% (-27% earlier). in fact if anything, recent draw-downs seem to be less deep, but people forget the normal bull market pattern. don't panic, buy the dip. or buy a bit of $CMSTR with… pic.twitter.com/vBOjFN1TOn
— Adam Back (@adam3us) July 5, 2024
The aggressive sell-off came after Bitcoin started trading below its 200-day moving average for the first time in 10 months after a drop below the $60,000 mark. Losing that level was important, as according to some analysts estimated it was the average entry price for spot Bitcoin exchange-traded fund (ETF) investors.
It led to over $800 million of long positions being liquidated in just three days, and was a confluence of various factors. As Bloomberg reported Bitcoin miners, who rely on powerful machines to secure the Bitcoin network and get rewarded with BTC for doing so, are still grappling with the financial impact of the halving event in April, which reduced the coinbase reward they received per block found in half. In response, some miners have been forced to sell off portions of their bitcoin holdings.
These miners are selling alongside the German government , which has been slowly moving funds from a wallet in which it has over 46,000 BTC onto cryptocurrency exchanges. The German government’s Bitcoin stash was originally of nearly 50,000 BTC, seized from the operators of a film piracy platform, Movie2k.to, which was last active over a decade ago.
On top of all this, defunct cryptocurrency exchange Mt. Gox has recently started repaying creditors in a move that puts an end to a 10-year long waiting period for users to get their digital assets back.
The exchange dominated Bitcoin trading volumes before it suffered a security breach in 2014 that resulted in the loss of an estimated 740,000 BTC and their bankruptcy. Some of the BTC was recovered and is now being returned to creditors, who analysts believe will sell the coins on the market after their 10-year waiting period.
Another analyst, Rekt Capital, suggested that taking into account data for the current market cycle “in terms of retrace depth, this is almost an average retrace,” while the pullback was of “above-average” duration.
Notably, the head of research at cryptocurrency brokerage FalconX, David Lawant, has recently suggested Bitcoin could see a dramatic upward price swing based on the current discount on the Coinbase Bitcoin premium and its historical significance.
Lawant noted that the last time the Coinbase Bitcoin premium was as negative as it currently was back in October 2023, when BTC was trading at around $27,000 and before the cryptocurrency entered a bull run to a new all-time high above $73,500.
In his post Lawant pointed to the indicator’s historical significance and pointed to a potential rise after BTC since corrected from over $73,000 to around $60,000 at the time of writing.
Featured image via Pixabay.