Bitcoin Closes to $25K Despite Drop to Non-Zero Balance Address – Here’s Where BTC Could Go Next

bitcoin wallet. Source: Adobe

Bitcoin remained close to yearly highs below $25,000 on Monday, with the world’s largest cryptocurrency by market capitalization up nearly 2.0% on the day after strongly rebounding from a brief drop below $24,000 earlier in the session. Bitcoin’s rally from $21,000 last week and its ongoing resilience has surprised many analysts.

Many were predicting an extension of the recent pullback from annual highs, as traders placed bets on the Fed tightening, as the ongoing strength in the US dollar, jump in US yields and decline in US equities, and increasing US regulatory action on crypto Worried about firms. That pessimism resulted in bitcoin suffering significant investor outflows last week, according to the latest CoinShares Weekly Money Flows report.

According to the report, bitcoin investment products saw outflows of only $25 million, taking the month-to-date inflows to negative $5.1 million. Meanwhile, the past week also saw a steady decline in the number of wallet addresses on the network that hold non-zero balances. According to data presented by crypto analytics firm Glassnode, the number of non-zero balance addresses fell from a record high of 44.226 million on Wednesday to just under 44 million on Sunday.

A decline of nearly 140,000 was reported for the week, with major address groups showing declines. Addresses holding at least 0.1 BTC fell from a record high of about 4.231 million on Tuesday to about 4.225 million by Sunday. Meanwhile, the number of addresses holding at least 1 BTC dropped to around 1,500 between Tuesday and Sunday.

Outflows from bitcoin investment products typically occur during periods of strong selling and downside pressure on the BTC price. Non-zero wallet address numbers also commonly occur at times when the price of BTC is falling, with small investors potentially capitulating. Despite this, bitcoin is still up more than 11% at the end of the week and at the current level of $24,700, is up almost 7% on the month.

Bitcoin’s resilience in the face of these headwinds suggests that demand remains strong enough to ease up-selling pressure from investors seeking to cash out in the wake of this year’s positive price run. For context, bitcoin is currently up just shy of 50% on the year.

But the momentum of the new address remains positive

Analysts probably won’t read too much into the recent drop in non-zero balance addresses, as it never moves in a straight line, even when the bitcoin price is performing well, as it has recently.

Glassnode’s New Address Momentum indicator, which tracks the 30 and 365-day moving averages (DMA) of new addresses (thus giving a high confidence signal) continues to suggest that the address trend in the bitcoin network remains positive. Is.

The 30DMA of new addresses moved above the 365DMA at the start of Q4 2022 and has been steadily rising ever since. Glassnode explains, “Healthy network adoption is often characterized by an increase in daily active users, greater transaction throughput, and an increased demand for block space (and vice versa).”

When the monthly (30DMA) is above the yearly (365DMA), it “indicates an expansion in on-chain activity, typical of improving network fundamentals and an increase in network utilization”. As a result, it may not be surprising to see that bitcoin bull markets often coincide with periods where the 30DMA of new addresses is rising and above its 365DMA, which is the case right now.

Here’s where the BTC price could go next

Some analysts attribute bitcoin’s recent strong performance to optimism about recent developments in Asia in the face of US regulatory and macro concerns. Namely, since departing from its controversial and economically stifling zero COVID-19 policy last year, China has been pumping liquidity into its financial markets this year. The PBoC just pumped a massive CNY 835 billion into its banking system through reverse repos, the biggest move in a year.

And people are not getting too excited about the easing of liquidity conditions in Asia. Hong Kong has openly expressed its desire to become a global crypto hub and on Monday proposed new legislation that would let retail investors trade blue chip cryptocurrencies on licensed exchanges. This is in sharp contrast to China, where all retail crypto investment is banned.

Analysts believe that China is using Hong Kong as a petri-dish to experiment with crypto, before easing its own restrictions. Meanwhile, Hong Kong could act as a gateway for Chinese capital to enter the global crypto markets. “My working thesis ATM (at the moment) is that the next bull run is going to start in the east,” Gemini co-founder Cameron Winklevoss announced on Twitter over the weekend.

Easing Asian liquidity conditions and hopes that regulatory easing in Hong Kong could facilitate Chinese inflows into crypto may continue to weigh down prices in the coming days and weeks, even as upcoming US macro data still warms the economy. This points to a possible ramp-up of Fed tightening rates as a result.

Looking at BTC/USD on the four-hour candlesticks, the cryptocurrency appears to be forming an ascending triangle. These usually suggest a build-up of buying pressure and often form ahead of a bullish breakout. If bitcoin were to break above resistance in the lows of $25,000, the path would be opened for a sharp rally towards $28,000 (late May 2022 low). This would mark a rally of more than 13% from current levels, and take bitcoin’s year-to-date gains of close to 7.0%.


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