Bitcoin [BTC] manages to float above $20,000 despite recent liquidations and heavy outflows

If you’ve been watching the cryptocurrency closely, or even investing in it, you’re probably wondering if the recent bear cycle is over. The truth is that the market remains unpredictable, especially over the long term. Nonetheless, here are some opinions and observations that will help you better understand the current state of the market.

We have seen heavy liquidations in Bitcoin recently [BTC] Place. Some investment firms that have dabbled in bitcoin, like Celsius, went bankrupt during the last crash. The bear market liquidated many heavily leveraged positions. Companies like Tesla that recently invested in BTC sold their holdings.

Tesla sold 75% of its #bitcoin this week, and then bitcoin just made another block and moved on.

— Lark Davis (@TheCryptoLark) July 23, 2022

Assessment of the market prospects

Despite the heavy outflows, Bitcoin still managed to promptly recover above $20,000. The recovery demonstrated Bitcoin’s strength despite being stress tested in highly volatile and adverse market conditions. Could this result be a sign that the market is poised for a bigger recovery?

Looking at some metrics can help paint a clearer picture of BTC’s current position. For example, addresses with more than 100 BTC have drastically reduced their sell-off. The number of such addresses has increased significantly since mid-June, supporting Bitcoin’s bullish performance.

Source: Glassnode

A slight decline in the same metric over the past few days suggests that increased selling pressure could prevent further upside in the short-term. BTC balances on exchanges have been everywhere for the month, but outflows and inflows have relatively balanced out. However, the Total Addresses metric shows that the number of addresses has steadily increased over the past 30 days.

Source: Glassnode

However, the balance sheet on the stock exchanges has reduced significantly in recent months. This is a healthy sign of Bitcoin’s long-term performance. It underlines the strong demand at lower price levels. Investors therefore took advantage of the lower prices. However, some exchanges may have higher balances due to the long-term increase in trading volume.

When I read Glassnode reports of Bitcoin exiting exchanges, I always thought, “Huh?” The graphic below explains it. Excessive shrinking, but Binance (and BFX) are growing.

Also shows the relative size of the exchange in that dimension. pic.twitter.com/7CPWhUJOQp

— CZ 🔶 Binance (@cz_binance) July 23, 2022

Bitcoin risk appetite and the FED

It’s no secret that most of the top investors in Bitcoin have held Bitcoin as a risk asset. This means they sold or avoided BTC when the Federal Reserve started raising interest rates. If this trend continues, we will likely continue to see more selling pressure on Bitcoin. A softer approach to interest rates could support more upside.

While the Fed is keeping BTC a chip over its shoulder, other factors will impact its short- and long-term performance. Regulations and investor sentiment continue to have a significant impact on BTC’s performance. For example, favorable SEC crypto laws could favor crypto bulls. The fact that the market bottomed recently is also a healthy sign and improved investor sentiment since June may encourage more buyers.

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