As panic emerges on cryptocurrency market, $15,000 is no longer unrealistic scenario
The most recent Bitcoin plunge has surprised the majority of market participants, considering the fact that most of the dust settled after the FTX catastrophe. However, the first cryptocurrency is still having trouble keeping up with the selling pressure, and the reason has already been described by Santiment.
According to the analytical firm, the plunge to $15,800 for the first time in two years was caused by FUD due to the lack of trust in centralized exchanges that accelerated after the FTX drama.
🧘 #Bitcoin dropped below $15.8k for the first time in 2 years, and address activity spiked to its highest level in over 6 months. #FUD due to lack of trust in exchanges historically benefits the patient, as we see $BTC continue moving into self custody. https://t.co/lz5FOkIkRX pic.twitter.com/6PKUA29nDE
— Santiment (@santimentfeed) November 21, 2022
Most investors in derivatives markets are liquidating their positions to withdraw remaining funds and deleverage their portfolios. Such a large spike in selling pressure at a time when the whole market is experiencing issues with liquidity is the perfect way to push the price of the first cryptocurrency to values unseen for years.
This thesis is also confirmed by the spike in address activity that usually happens during a large exchange outflow period when investors move holdings from third parties to self-custody. The opposite of this process usually happens when the market is rebounding and traders move their funds back on trading platforms to use leverage and maximize their profits, or gain exposure to alternative assets.
The most likely scenario from here is the continued stagnation of the market due to the lack of liquidity and fresh inflows. According to CoinShares’ data, institutional investors still avoid exposure to digital assets. The situation is unlikely to change until the stretch monetary policy in the U.S. prevails and investors abstain from additional risk exposure.
At press time, Bitcoin is trading at $16,000 and losing 1.5% of its value in the last 24 hours.
