Floor Formation?

Market Meditations | June 28, 2022

We’ll never see $20k BTC again, Willy Woo boldly declared on January 3rd 2021. The well-known Bitcoin on-chain guru added that losing the $24k support would need a black swan event. Well one of those things came true and now his go-to analytics company, Glassnode, is trying to assess whether the floor is in:

  • massive de-leveraging event has taken place, many people were liquidated and many more lost the confidence to hold on.
  • As CZ of Binance notes in his blog, there can be two speeds of de-leveraging, and when funds lend to other funds it can take quite some time before the extent of the pain is felt.
  • BTC and ETH are currently showing statistical deviations far away from historical means and Glassnode has used five models to assess the probability of a floor being in.
  • The models show that only 13 out of 4,360 trading days (0.2%) have experienced these conditions, during the Jan 2015 and March 2020 events.
  • There is some accumulation happening now, mostly driven by Whales (>10k BTC) and Shrimp (<1BTC). While this could be a bottom indicator, it also happened during the first dips after the 2021 ATH.
  • Though there has been Long Term Holder selling, it has predominantly been of coins bought in the 2020-2022 cycle, rather than a loss of conviction of the Very Long-Term BTC holders.

Historical data is only useful if we believe it helps predict the future. The bet is now one of conviction in the narrative of whether crypto has a future or not. Whether it is just a period of low demand or an over-extension to the downside is yet to be seen.