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Bitcoin (BTC) in capitulation phase; Is a year-end rally still possible?

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For André Franco, chief analyst at Mercado Bitcoin, the end of the year rally is indeed possible (Image: Freepik)

O Bitcoin (BTC) has been going through a phase of low volatility after the FTX brokerage crisis in November. THE cryptocurrency it rose from US$21,000 on November 5th, and has been stuck in the region of US$17,000 ever since.

The cryptocurrency this month has accumulated losses of more than 20%, compared to a year where it melts more than 64%. In order to try to identify a rally, it is first necessary to analyze some important data for this purpose.

The future only belongs to Satoshi

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First of all, data from Coinglass shows that the market underwent a leverage cleanup in November much like Terra (LUNA) did in May.

As of early November, over $228 million in long positions and $70 million in short positions in crypto assets have been liquidated on Binance alone. The screen price drop, fear and FTX contagion sent the price of Bitcoin down even further.

Crypto market sales from September 6 to December 5, 2022. (Image: Coinglass)
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The number of Open Interest in Futures on Binance – from open interest contracts to derivatives – went from US$4.16 billion on November 5th to US$3.02 billion today.

Open futures derivatives on Binance from November 1 to December 5, 2022 (Image: Coinglass)

It was a trigger for a massive selloff by traders, and dump of bitcoins on the market. However, if there are people selling, there are those who buy, and those who buy may be thinking long term.

The amount of Bitcoin and exchanges have been decreasing at record levels all year. In the post-FTX clipping, long-term investor portfolios were sent who wanted to dispose of their assets, but according to Coinglass data, the amount of Bitcoin leaving exceeded this number.

Flow of itcoins at brokerages from September 14th to December 5th, 2022. (Image: Coinglass)

Bitcoins on brokerages usually indicate trading, both selling and buying cryptocurrency, and the movement of scarcity in it, may indicate a long-term view on the part of those who buy.

To better understand the movement of those who sell, an analysis of the NUPL can also be used.

The NUPL is unrealized profit/loss divided by market value. This creates the Unrealized Net Profit/Loss, or NUPL, which is very useful for tracking long-term Bitcoin investor sentiment.

According to “Look into Bitcoin”, investors who are not sending their Bitcoins to brokerages are at an unrealized loss of 17.62%, this number reached 31.35% shortly after the FTX crisis.

NUPL metric from October 2021 to December 2022. (Image: Look Into Bitcoin)

The move could indicate a capitulation move after the FTX crisis, where investors are selling even at a loss.

The likely scenario is that the market has already taken so much beating throughout the year that after FTX, short-term investors decided to dispose of their assets, even at a loss, as seen above.

The metric that can help compose this thesis is the wave of holders – which measures the “age” of bitcoins moved in a given period of time.

In the graph it is observed when bitcoins were last moved between wallets and grouped the amount of them by different age groups shown in the key of the graph.

Bitcoin age groups moved from November 2021 to December 2022. (Image: Look Into Bitcoin)

It is important to note that over 20.46% of bitcoins currently moving are in the one to two year old age range. These are the “same bitcoins” that reached an all-time high of $69,000 in November last year.

Last year, the group of 1 to 2 years represented 9.65%, and those purchased between 6 to 12 months, that is, that year represented an amount of more than 18%.

From the intersection of the graphs, it is possible to say that there is a high probability that we are in a moment of capitulation, where investors who entered the bull market are selling their cryptocurrencies for fear of the market falling further, while long-term investors take advantage of accumulate.

Macroeconomics should help this time

For André Franco, chief analyst at Mercado Bitcoin, the end of the year rally is indeed possible. Franco says that the macroeconomic scenario may favor Bitcoin at the end of the year.

“Everything we look at from the macroeconomic point of view, and from the intrinsic problem of the crypto market, ends up favoring the narrative that by the end of the year we will have a rally”, he says.

Source: Moneytimes

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