Cryptocurrency investors are extremely interested in Bitcoin at $20,000. What does this mean?
The $20,000 line has been an important benchmark on the Bitcoin chart for most market players for several months now, as it is at least the price high of the first cryptocurrency during its growth phase in 2017. A recent report from analytics platform Glassnode confirms this fact. According to it, a large “demand zone” has been created at the aforementioned level – the price value on the chart, where even many short-term BTC holders often buy the coin. We tell you more about what’s going on.
This morning, Bitcoin is trading in the $21.3k zone, the equivalent of a 1.3 per cent increase over the course of the day. For the week so far, the first cryptocurrency has seen a more noticeable drop of 8.6 per cent. Here is the hourly chart of the BTC exchange rate.
Hourly chart of Bitcoin exchange rate
In general, a similar situation is typical for most of the coins in the top ten overall cryptocurrency rankings by market capitalisation. Solana SOL suffered the most on a weekly scale, with a 17.8 per cent drop.
Top ten cryptocurrencies by market capitalisation
Could Bitcoin’s price rise?
Similar “demand zones” have previously formed on the Bitcoin chart as the cryptocurrency’s value has fallen over the past few months. These are the $40,000, $30,000 and $20,000 lines, as they have seen high activity from short-term BTC holders. That is, we are talking about those investors who hold coins in their addresses for a fairly short period of time, which means they are only interested in the prospect of making quick money.
High demand zones for BTC, calculated from the movement of a large number of coins
After breaking through the aforementioned levels, some traders never sold their bitcoins. This is for an obvious reason: there are many of them who care less about the price of the asset specifically, but are more focused on its fundamental prospects. In other words, with each wave of Bitcoin’s decline, there are more and more investors who believe in the potential of the major cryptocurrency and do not panic about its collapse.
Over time, this category of traders will become a group of long-term Bitcoin investors. According to Cointelegraph's sources, an investor only needs to keep their coins in their wallet for at least 155 days to gain this status.
In the current bearish trend, long-term Bitcoin holders have almost 400 consecutive profitable days. In the chart below, periods of high and low profitability are marked by yellow and purple areas respectively, with the chart itself being below the Bitcoin price chart. At the same time, profitability for the year in the form of the blue line is higher than profitability for the last 30 days in the form of the red line.
Profitability of long-term BTC holders
The report concludes that while “the worst may be over”, BTC could remain in a narrow range on the chart for some time to come. During previous bearish trends, the market has seen similar dynamics for at least nearly 250 days, with the current bear cycle “officially” beginning relatively recently.
Read also: The head of FTX has been accused of self-promotion on bankrupt cryptocurrencies. How has he responded to the criticism?
While everyone is watching the market, there was one interesting development in China: the head of the digital yuan project, Mu Changchun, said that the Chinese CBDC should not have anonymity similar to cash. Changchun spoke more about the CBDC’s digital currency goals at the Digital China Construction Summit, which was held in the country on Monday.
Since the start of the digital yuan pilot project in 2020, China’s central bank has never sought full anonymity for the currency. Instead, the bank is working to ensure only limited anonymity in line with global anti-money laundering regulations, Changchun said.
Photo from the Digital China Construction summit in China
Chinese authorities should be able to access CBDC data on people suspected of crimes. However, partial anonymity is still an important feature of the digital yuan project, as it guarantees transaction privacy and protection of personal information. However, a fully anonymous digital yuan would hinder the prevention of crimes such as money laundering, terrorist financing and tax evasion, the expert said. Here is his rejoinder.
The central bank’s digital currency is more portable. If it provides the same anonymity as cash, it will make illegal money-laundering-type transactions much easier.
In any case, the Chinese government intends to promote the digital yuan to its dominant position in the country’s monetary circulation. The intention is very simple – to gain control over the financial flows of the population. For the same purpose, China has previously banned Bitcoin mining altogether, “getting rid” of the main “competitor” to the national digital currency project. However, local residents can still buy the cryptocurrency, and the ban on BTC mining has proven ineffective.
We believe that the $20,000 per Bitcoin line is primarily important because it is the cryptocurrency's previous bull run rate maximum. Historically, the current price of the coin has never fallen below the previous peak during a collapse, but 2022 has already been an exception. Accordingly, holding this zone would indicate a normalisation in the coin industry - and that would definitely have a positive impact on trader sentiment.
What do you think about it? Share your opinion in our Millionaire Crypto Chat. There we will discuss other important developments from the world of blockchain and decentralization.
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