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Holding and buying Bitcoin was profitable in 95.4% of the days

May 11, 2020

With Bitcoin (BTC) halving in less than 4 hours, there are strong signs that investors will continue to accumulate Bitcoin.

Readers will remember that on March 12, a day known today as Black Thursday, the price of the top-rated crypto asset in CoinMarketCap fell more than 50% and saw the second-largest daily decline in history .

While this was an incredibly painful 48-hour period for over-priced traders, The resulting entry prices and other cryptocurrencies offered a long-term opportunity for long-term investors.

Holding and buying Bitcoin was profitable in 95.4% of the daysHolding and buying Bitcoin was profitable in 95.4% of the days

Aside from the impressive rise in Bitcoin from $ 3,750 to $ 9,450, the number of opportunities they have had in the past few weeks can also be seen in various sources in the chain and in the market cycle.

Chain data offers a unique insight into the behavior of market participants when analyzing transactions in the blockchain. From the size of transactions and wallets to more complex tools, blockchains provide a wealth of data that can help us understand what happened to prices in the past, and give investors and researchers clues as to what to expect in the future .

The Bitcoin price briefly fell below its base cost

Bitcoin MVRV Z-Score. Source: lookintobitcoin.com

The MVRV-Z-Score is an “on-chain” indicator that uses blockchain analysis to identify periods in which Bitcoin is extremely over or undervalued in relation to “fair value”.. The MV part of the name stands for Market Value, i.e. the market capitalization of Bitcoin, or the number of coins in circulation multiplied by the price.

The RV part stands for Realized Value, which uses the price of the coins instead of the current price when they were last sent from one wallet to another. So we can think of Realized Value as the average cost base that investors paid for their Bitcoin.

In the week after Black Thursday, the market value (blue line in the following table) was lower than the realized value (orange line). This moment is highlighted by the arrow in the graphic. This is a rare event in Bitcoin history as prices for digital currencies have risen aggressively over time. Every time this happens, it is an incredible buying opportunity for long-term investors.

In addition, the indicator uses a standard deviation line called the Z-Score (red line in the graph) that separates the differences in the MVRV data. The Z-Score can very effectively illustrate market floors (green zone) and roofs (red zone).

You predicted the upper limit of the previous market cycle in 2 weeks! After a quick dip in the green “buy” zone, the Z-Score was excited and has risen rapidly since then, resulting in a recent price increase of over $ 10,000.

The purchase of whales falls according to a simple indicator

The moving average of 200 weeks has been a consistently resolved support for Bitcoin over time. As shown below If the price goes back to this moving average, historically it was a great opportunity to “buy the case”.

1-week chart of the BTC / USD pair. Source: TradingView

Whales are known to take the opportunity to start buying when the price reaches this key level. CryptoCobain a Bitcoin OG and Whale were not ashamed to buy at these levels during the recent market crash. The Bitcoin whale tweeted with humor:

I call the old god. I call the new gods. I summon you. Buy it in the elders’ words

In addition to using the standard WMA (Weighted Moving Average) line of 200, it is possible to create a heat map from its movement over time as it is an important support for the Bitcoin price.

The 200 WMA heat map shows that while Bitcoin price has recovered from this important moving average in recent weeks, there is still a long way to go before the market overheats.

200-week moving average heat map. Source: lookintobitcoin.com

The orange and red dots on the Bitcoin price line stand for high monthly changes between +12 and + 16% compared to 200 WMA. In the past, these colors have highlighted the months when the bitcoin price spreads too far and wide where the market begins to outperform.

Currently, the price remains solid dark blue, so this could be interpreted as giving the price a lot of room for an increase due to Bitcoin’s previous market structures.

HODLs continue to make HODL

On-chain data continues to show that sentiment among medium and long-term investors remains positive and that they are unwilling to sell their holdings soon.

Despite the great volatility of the Bitcoin price in the past few months The percentage of Bitcoin that hasn’t been in the chain for more than a year remains at 60%. This shows that there are strong hands among Bitcoin investors.

Wave of 1+ year HODL. Source: lookintobitcoin.com

The graphic also shows the cyclical nature of HODL. The number of coins held over a year usually decreases sustainably as the market approaches the final stage of a Bitcoin bull market.

This is indicated by the green down arrows in the field below. There is currently no continuing decline of +1 years against HODL, which in turn indicates that the market is entering a new bull market and investors are collecting more Bitcoin.

Wave of 1+ year of HODL. Source: lookintobitcoin.com

As the general market becomes more aware of these HODL values, This will put more pressure on demand for an already scarce asset.

The past few weeks have seen rapid changes in investor sentiment

Relative unrealized gain / loss. Source: lookintobitcoin.com

After briefly entering the capitulation level six weeks ago, the market has spent the last few weeks in the area of ​​hope and fear. The latest bomb shows how investor sentiment enters the phase of optimism and denial.

The relative unrealized profit / loss metric is able to monitor market sentiment through actual market activity rather than just behavior. You can do this by looking at the relationship between Bitcoin’s market cap and when investors make profits.

In this way, important market phases in the history of Bitcoin, including the top and bottom of the market, were consistently highlighted.

Indeed, looking back at previous cycles, We can see that investor sentiment is likely to take some time to reach the level of greed that historically has proven to be an excellent time to make a profit for smart investors.

HODLers have their moment

While Bitcoin’s volatility has made some traders dizzy in recent months, From a broader perspective, it can be seen in the long run that HODLers will continue to benefit from the remarkable increase in wealth over time.

Bitcoin profitable days. Source: lookintobitcoin.com

If we look at the percentage of days in Bitcoin history when buying Bitcoin would have brought profits to investors at today’s prices, we see it is an astonishing 95.4%. Patience clearly pays off for those who can endure short-term price changes.

As halving approaches and central banks around the world continue to print, the significant downside risks associated with Bitcoin are increasingly limited.

So investors only have to wonder how quickly it will take for the percentage of profitable days in which Bitcoin is held to reach 100% when the price explodes at new highs.

The views and opinions expressed here are solely those of author and do not necessarily reflect Cointelegraph’s views. Every investment and trade movement involves risks. You have to do your own research when making a decision.

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