Bitcoin
Bitcoin’s latest top is different from the 2021 peak, analyst explains why
An analyst explained why Bitcoin’s recent rally has experienced different market conditions than those seen during the peak of the 2021 bull run.
Bitcoin sell-offs were dominated by selling in recent market rally
In a new publish on X, the Checkmate network analyst pointed out as the last maximum of 2024 reached after the spot exchange-traded fund (ETF) inflows have a big difference when compared to the 2021 peak.
The difference lies in the evolution recorded in the derivatives markets. Below is the graph shared by the analyst that shows the tendency for long settlements to predominate in the sector in recent years.
The distribution of liquidations on derivatives market over the last few years | Source: @_Checkmatey_ on X
“Sale off” here naturally refers to the act of forced closure that any derivatives market contract undergoes on an exchange when it accumulates losses of a certain degree.
The risk of a contract being liquidated becomes greater and the asset’s price becomes more volatile. During sharp rises and falls, huge amounts of liquidations can accumulate in the market.
In the graph, it is visible that as the rise in cryptocurrency occurred this year, the short holders I was taking a beating. This was natural, as peaks accumulated losses for these investors who were betting on a decline, so price growth as rapid as that witnessed would have pushed many of these contracts into liquidation.
Interestingly, the scale of the domain sold remained throughout the run, implying that investors did not believe the run would continue at every point in the rally, so they bet against it.
This also held true in the recent stagnation following the top, as short sell-offs outnumbered long sell-offs even though the price declined.
As is evident from the graph, the 2021 peaks registered a different trend. Long positions were being liquidated as Bitcoin peaked during the first half of the 2021 peak and second half.
During these periods, investors became too greedy and only bet on the continued rise, even when the asset slowed down. This greed appears not to have overtaken the market in the bull run.
Although Bitcoin’s current rally is different from the last in this metric, analyst Maartunn pointed to an publish another indicator where the trend appears to be similar to that seen in previous peaks.
Looks like the value of the metric has been plunging in recent days | Source: @JA_Maartun on X
This indicator is the Currency Days Destroyed (CDD), which basically tells us about the scale of the movement of dormant coins that is happening in the market at the moment. It appears that this metric has reached very high levels recently.
“Coin Days Destroyed has probably peaked,” says Maartunn. “The price of Bitcoin typically peaks around the same time.” It should be noted that while this was true for some of the tops, the 2021 peak took months to form after the metric peaked.
BTC Price
At the time of writing, Bitcoin is floating around $62,200, up more than 5% over the past week.
BTC appears to have been sliding off in the last few days | Source: BTCUSD on TradingView
Featured image from Shutterstock.com, checkonchain.com, CryptoQuant.com, chart from TradingView.com