Bitcoin’s Major Correction
This week, Bitcoin faced its steepest correction in the current bull cycle, dropping below $50,000. The decline from its record high exceeded 32%.
Panic Among Short-Term Holders
The sharp drop, fueled by recession fears and rising geopolitical tension, sparked panic among some investors. On August 5th, realized losses on the spot market reached $1.4 billion, marking the 13th largest sell-off in Bitcoin’s history in dollar terms.
Interestingly, only short-term holders (STH) succumbed to panic, accounting for 97% of total losses.
Long-Term Holders Buy the Dip
In contrast, long-term holders (LTH) remained calm and even increased their positions, seizing the opportunity presented by lower prices. Over the past 30 days, the total volume of long-term holder addresses (with two incoming and no outgoing transactions, excluding ETF addresses) surged to a record 404,400 BTC, worth $22.8 billion.
Increased Exchange Inflows
Traders recognized opportunities and boosted net inflows to crypto exchanges. On Binance, inflows reached $1.2 billion on Tuesday, indicating a lack of widespread panic. Typically, exchanges see net outflows during anxious periods. However, Binance CEO Richard Teng did not clarify whether these inflows were in fiat (buying) or cryptocurrencies (selling).
Behavioral Differences Between Holders
The key difference between STH and LTH lies in their investment horizon. STH typically hold coins for less than two months, even in a rising market, and are prone to mood swings. LTH, on the other hand, focus on long-term trends, accumulating coins during corrections and taking profits as prices rise to new highs.
Positive Outlook for Bitcoin
Bitcoin’s prospects remain favorable, despite the increased risk of a U.S. recession. The government has yet to shift its focus to addressing the budget deficit, and rising unemployment may force the Federal Reserve to resume economic stimulus prematurely. This suggests more liquidity injections are ahead.
High Bitcoin Price Predictions
As Bitmex co-founder Arthur Hayes stated, “It doesn’t matter who wins the presidential race—both will print money to cover expenses. Bitcoin’s price in this cycle will be very high—hundreds of thousands, possibly $1 million.”
