Cryptocurrency prices in general and Bitcoin prices, in particular, have been pretty resilient and range-bound for the past couple of weeks. Looking at the BTC price action — it has hugged a $10k price range, ever since reaching an all-time high (ATH) around $62k. A lot of previous analyses in this regard have shown that there is a lot of demand from existing buyers to support high price levels. At the time of writing, Bitcoin was hovering around the $59k mark.
In one of the earlier pieces that I wrote a few weeks ago, I highlighted the fact that new large investors may have lifted the BTC price floor to $35k. Taking this argument a little further, we look at the most recent Chainalysis Market Intel, which analyzes all the entities holding Bitcoin — not just the ‘Whales’. For this purpose, they divided all these entities into 1,525 groups based on the following metrics, thus providing a clear picture of the currently mined supply of 18.7 million bitcoin.
- personal or business wallet (if a business, which type)
- duration for which they held the bitcoin for
- amount of bitcoin they held
- USD gain realized ever since their acquisition
- extent to which they send on the bitcoin they receive
According to the report, the chart above shows the USD cost of acquisition for the 18.7 million bitcoin that are collectively held by these 1,525 entity groups on 29 March 2021. As shown in the example above, 8.4 million bitcoin were last acquired for less than $10k each.
Looking at a higher price level, 0.1 million bitcoin were acquired for more than $57,626, the price at the close of 29 March — although these investors are only slightly in the money (making profit), they still seem to be holding on to their bitcoins.
The question then arises, how does this explain the price resilience in Bitcoin? The answer is: By looking at the price data — 5.6 million bitcoin were acquired at a cost of more than $30k and continue to be held, 3.1 million bitcoin at more than $40k, and 1.6 million bitcoin at more than $50k. Although less of Bitcoin is being bought with an increased price, the demand nevertheless, remains robust.
Even after considering that some of these bitcoin acquisitions maybe internal transfers, the underlying hypothesis suggests that significant resources are available, should the price fall back to $50k. Having said that, just $1.4 billion has been spent to acquire 770k bitcoin at more than $55k — this provides much weaker price support.
If the buying persists above this level, this would become firmer support, otherwise, the price is expected to fall below $55k. In that case, too, $50k is expected to provide resilient support — going by the buying seen above that level.
Originally Published on Medium
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