The Black Thursday of March 2020 triggered comparable falls for bitcoin and the S&P 500.
With Evergrande’s difficulties in China, the S&P 500 fell 4% and BTC was down 23%.
The speculative sales of bitcoin last week, associated with the entry into default of the Chinese real estate company Evergrande, were disproportionate, according to the opinion of the analyst of the market of bitcoin (BTC) Willy Woo. In his most recent prediction, Woo insists that, Despite last week’s BTC price drop, the build-up has continued, especially by holders who have little willingness to sell.
At the beginning of the week, when the Chinese real estate firm Evergrande went into default, as reported by CriptoNoticias, the price of bitcoin fell along with the indices that track traditional assets. In his analysis of the bitcoin market, Woo draws attention to the fact that in general market downturns, the deterioration in the appreciation of bitcoin was in a range comparable to the decline in traditional stocks.
In the graph below, the analyst shows the fall of March 2020, when bitcoin fell 53%. At that point, the Standard & Poors Index, or S&P 500, was down 34%. These decreases are then contrasted with those that have occurred since the beginning of September.
As can be seen in the graph, While in March 2020 the decline in BTC was more pronounced than that of the S&P 500, both setbacks were in the double digits. In the fall of this September, Willy Woo highlights that while BTC shows a 23% deterioration, the S&P 500 index fell only 4%. “Even at first glance, this seems like an overreaction from BTC speculators,” says Woo.
Bitcoin fundamentals remain healthy
The analyst notes that in March 2020 there were moderate sales by long-term investors, as can be seen in the following graph. The supply shock levels (similar to the unavailability of BTC for sale) are shown on exchanges and in relation to short and long-term holders. The decline of those three curves in March 2020 implies more BTC available for sale.
In this last bitcoin price bearish stage in September, the supply shock has increased in the three cases mentioned: That means less BTC on exchanges and more BTC in the hands of short-term and long-term holders.
During that time [marzo 2020] We saw some bearish selling from long-term investors, however in this current situation none of this weakness is showing. Indeed, short-term speculative selling is unjustified and unsustainable.
This Friday, after the declaration of the People’s Bank of China in which it prohibits all operations with cryptocurrencies, as reported by CriptoNoticias, the price of BTC fell 8.9%, to USD 41,108, to then rebound slightly and fluctuate around at USD 42,000.
There are bullish signs in BTC movements among holders
The trend of currency movement among investors seems to be heading toward what Woo calls “a perfect setup for a bullish breakout.” The analyst claims that he has been working on a new chart that works with three categories of holders: strong, intermediate and weak. The strength of each category is then plotted against the others, as the coins move between the holders.
The perfect conditions for a rally Strong holders occur when strong holders are at their peak while weak and medium holders are at their minimum, Woo asserts.
On the chart, areas where the aforementioned bullish setup occurs are highlighted in green. That is, the BTC in the hands of strong holders (blue) at maximum and what is retained by medium holders (red) and weak holders (segmented red) at minimum values or at low values. It is found that in October and November 2020, when a clear upward phase of the price manifested, this scenario was maintained.
It is also noted that when the historical maximum of the price of BTC occurs, in mid-April, this scenario also occurs, but the taking of profits had an impact on strong holders reducing their retained BTC.
This fact preceded the zone of intense sales in May, as can be seen in the graph, in which the bullish configuration is reversed and the price falls significantly. Strong holders sell their coins which pass into the hands of the other two categories. At the present time, weak holders are at a minimum and what is retained by medium holders is decreasing, while strong holders regain dominance. This leads Woo to predict a bullish breakout within one to two weeks.