Bitcoin (BTC) was struck hard on March 13, however, it looks like the flagship cryptocurrency is back on track currently flat-lining near the $6500-$6700 region. The Covid-19 situation has been a significant setback for every asset out there. However, BTC seems to be recovering well even though it still isn’t out of danger.
BTC has recovered almost 70% from its lows of $3678. While analysts suggest that the largest cryptocurrency might still be vulnerable to another liquidity crisis, data from Glassnode reveals that the number of on-chain deposits to crypto exchanges has declined significantly over the past 12 days, suggesting that a lot of weak hands have been shaken off.
The number of transfers to exchange addresses has fallen by 35% from 33,303 to 21,048 over the last 12 days. The data has been collected from 12 major exchanges, namely Binance, Bitcoin.de, Bitfinex, Bitstamp, Bittrex, Coinbase, Gemini, Hitbtc, Huobi, Kraken, Okex and Poloniex.
As of now, it looks like the selling pressure has reduced significantly because investors tend to bailout in the event of a bear market. Also, substantial inflows into exchanges are often seen right before significant drops. In this case, data shows that deposits started coming in days before the market crash. According to Matthew Dibb, co-founder and COO of Stack:
“It comes as no surprise that deposits on digital asset exchanges have dropped by more than 30 per cent, as investor confidence took a hit after the sudden price crash seen on March 13 and many short-term traders and investors sold off their holdings to cut off what they saw as potential for further losses.”
Ashish Singhal, CEO of non-custodial exchange CoinSwitch, believes that investors have regained confidence on BTC and are avoiding trading or selling of the token at these prices. Most of them are holding on to their coins and have faith in the long-term viability of the cryptocurrency.
Furthermore, sentiment correlation data from analytics firm The Tie shows that Bitcoin and gold sentiment has been going side by side throughout March, and this relationship had been increasing significantly since April last year. This shows that investors believe Bitcoin could be as efficient as Gold amidst the global economic crisis.
For now, critical support is at the $6,458 region, which upon violation would mark the break of a 4-day consolidation towards the lower end of a sideways channel formed on the 4-hour chart. Upon breach, the price could tank towards $6000 or further below.
On the other hand, a break above $7000 would be a massive boost for the bulls. The prices could touch the next resistance levels at the $7700-$7800 region. Overall, it is unlikely that BTC would fall prey to another liquidity crisis unless the global economic condition worsens.