Bitcoin dropped below $32,000 on Monday and is perilously close to breaking the $32,500 level amid a massive sell-off in cryptocurrencies and equities. With the value of BTC/USD down over 7% in the last 24 hours, bulls are staring at price levels seen in July 2021, with on-chain data suggesting more pain.
BTC price drop sends 10% of supply into non-profit zone
As cryptocurrencies are sold alongside equities, more BTC has dropped causing a loss. According to on-chain analytics platform Glassnode, the volatile price drop below $33,000 has thrown an additional 10% of Bitcoin’s supply into the red. Last week, Glassnode highlighted how a drop to lows of $33,000 would drive more people, especially short-term investors, into unprofitability. Bitcoin was then around $38K, but the declines seen in recent days appear to have spooked a large group of short-term holders, even as stocks were sold to see the broader risk market facing more pain. “Bitcoin bulls remain under pressure this week, with prices dropping to $33,800 and network profitability dropping ~10%. Weakness appeared in ETF product flows, contraction of stablecoin supply and the urgency of investors to deposit coins on exchanges, largely in response to negative volatility,” the company wrote in its weekly newsletter.
The pain can go on
Bitcoin is now over 53% off when compared to November, which was above $69K. According to Glassnode, there could still be more pain if the current downgrade is compared to previous bear markets. First, the decline seen in July 2021 took BTC to a price level of 54.2% of its ATH. The bear markets that took place in 2015, 2018 and March 2020 were even more painful, with the capitulation sending Bitcoin -77.2% and -85.5% from its all-time highs. The network’s profitability has dropped to around 60% with the latest drop in BTC price pushing the top cryptocurrency to a ‘pain threshold’ similar to previous bear markets. Profitability levels are also similar to those recorded in the 2018 and 2019-20 bear markets. “However, it should be noted that both cases predated the final capitulation release event,” the company’s analysts added in the report. Cryptocurrency trader and analyst HornHairs believes a bottom has yet to arrive and more pain is likely. “Looking at the time-averaged cycle highs to cycle lows, as well as the time-averaged cycle lows that occur before the next halving, September-November of this year would be the most historically similar to previous cycles, in terms of range of time, for a fund to form.”
Chart showing the historical price movement of BTC. Source: HornHairs on Twitter. According to Michael van de Poppe, a full-time trader and cryptocurrency analyst, investors may want to look at current BTC price levels. In his opinion, the area could provide a “rebound play”.
#Bitcoin at this level should be interesting to keep an eye on. Didn’t bounce towards $37.5K, but it has been taking all the liquidity beneath the lows of 2022 and that should be a bounce play. pic.twitter.com/GMsToZTZMN
— Michael van de Poppe (@CryptoMichNL) May 9, 2022
Bitcoin was trading around $31,580 on Monday afternoon, down nearly 7.5% over the past 24 hours.