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Bitcoin fell nearly 20% over the weekend, to a three-month low of $42,874 following a market-wide flash crash. The shifting price action gave way to panic selling and weak speculation. On the other hand, ‘buy the dip’ exhortations have taken over crypto Twitter.
At the time of writing, Bitcoin appears to have recovered a bit, back towards $50,400, recording a daily gain of more than 6%. One question, however, is whether this recovery can be sustained.
Difficult price movements
For most of November, Bitcoin has made a lower low as the price is now down nearly 27% from its all-time high (ATH) of $69,000. Bitcoin’s November trajectory has highlighted that after each price drop, a small price increase or rather a consolidation, is recorded and then a larger decline.
Bitcoin price is down nearly 13% since November 16, then almost 9% since November 22, followed by a massive flash crash on December 3, dragging Bitcoin below $50,000. This price trajectory raises questions about whether the recent 6% rally is, at the time of writing, really a breakout or just another fakeout.
The latest drop also seems to affect Bitcoin’s MVRV (market value to real value) ratio, as the 30-day figure is -8%, showing the average loss of all locations just bought Bitcoin in the last month is about 8%. Over the weekend, Bitcoin’s short-term MVRV dropped to -19.4% before recovering.
Although the 7-day MVRV quickly moved up as the price recovered, Bitcoin’s 365-day MVRV is still far from the ‘recovery zone’, implying a further correction from a macro perspective. That said, there has been some growth recently.
Continue to accumulate
Starting from a slide to $42,874, addresses holding 100-10,000 BTC have accumulated over 67,000 BTC, highlighting how whales buy dips to perfection.
However, the key question is whether the recovery is really happening or will there be another dip?
First, the on-chain metrics and supply dynamics for Bitcoin are different this time around.
Back in April, the drop happened with an increase in exchange inflow, meaning that when the correction occurred, there was a positive net inflow of coins into exchange wallets. Now, however, the situation is different, so far, on a 30-day basis, we can still see outflows from major exchanges.
Furthermore, in April/May, trend risk accumulates in the red. Mainly because most of the address pools have been delivering Bitcoin in a time as opposed to now, when the trend is at a high but that’s because most of the address pools have seen some sideways action.
Therefore, while the overall trend offers some optimism, it is best to be cautious until Bitcoin breaks through the $54,000 mark. The short-term Bitcoin price trajectory can also be influenced by external factors. One of them is the next US inflation data release on December 10 and the US Federal Reserve (Fed) policy meeting on December 14.
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