On-chain Data and Analysis Shows Market Maturing During the Last Crypto Crash

On April 14, Bitcoin reached its all-time high (ATH) close to $65,000 and the overall capitalization of the cryptocurrency market, for the first time, exceeded the $2.5 trillion mark.

In the aftermath, Bitcoin began a correction that was accelerated both by FUD in the industry and by complications in the macroeconomic scenario.

The FUD

The FUD session started with Tesla CEO Elon Musk announcing on Twitter that he would no longer accept Bitcoins as a method of payment for his electric vehicles due to environmental concerns. The announcement made Bitcoin fall 17% in a few hours.

The FUD
BTC/USD at BITSTAMP. Source: Tradingview

A few days after, on May 19, a long squeeze caused euphoria in the market. Bitcoin was traded below $30k and in a few hours, it returned to $40K. The move resulted in the elimination of around $7.56 billion in long-leveraged positions in the Bitcoin derivative markets.

Last Crypto Crash
Bitcoin Liquidations. Source: bybit

On May 20, the United States Treasury Department announced that cryptocurrency exchanges should report all cryptocurrency transactions to the IRS over $10,000. On May 21, it was China’s turn to announce plans to ban and restrict cryptocurrency mining activities.

The cryptocurrency market existed without the blessings of Elon Musk, China has banned Bitcoin at least five more times and the IRS of several countries is eyeing Bitcoin. It is clear that what causes the market to fall is not necessarily a news item or two, but the sum of them in the context of market overbought.

From March 2020 to March 2021, Bitcoin increased by more than 1600%. And a correction was expected.

In any case, after the FUD, the price of Bitcoin fell 50% reaching $ 30,000, and the overall cryptocurrency market lost more than $ 1.3 trillion.

Still, on May 19, the market managed to recover and in the last few days, Bitcoin gained 36% and its value remained between $34 and $40 thousand. The total capitalization of the cryptocurrency market earned $388 billion and is again above $1.5 trillion.

Macro Scenery

In addition to the internal challenges of the cryptocurrency market, there is a macro context that requires caution. Due to concerns about inflation, traditional financial market investors are moving slowly, but such concerns may be good news for the investment and cryptocurrency sector.

In the macro-context, Bitcoin occupies a somewhat controversial position. While traditional investors see the crypto sector as high risk, Bitcoin has been bought by traditional investors as a form of protection due to its deflationary nature. In a scenario of inflationary risk, will Bitcoin and cryptocurrencies be seen as a hedge? This is the hypothesis that every market is waiting to investigate.

To visualize the next steps of the market, in this global chess, we can observe some fundamentalist data, seeking to understand the behavior of each player during the fall and recent price consolidation.

ATH of the Cumulative Number of Addresses

When BTC reached $30,000 on May 19, the accumulating addresses reached a new historic high. The accumulating addresses are all those with at least two entries and no output.

Cumulative Number of Addresses
Accumulating Bitcoin addresses. Source: Glassnode

The graphic above shows that never before in Bitcoin history have there been so many addresses with behavior indicating HOLD intent and never before have there been so many addresses with a Bitcoin balance between 100 and 1,000 BTC.

The great capitulation of cryptocurrencies

While buyers in the $55-60,000 range were desperately selling their newly acquired Bitcoins at exorbitant fees, Bitcoin whales were buying them. This process triggered one of the greatest capitulations in Bitcoin history. Whales managed to accumulate more than 122,588 BTCs with capitulation, meanwhile, weak hands lost $ 20 billion in a few hours.

Hashrate migration

Historically, China has always been responsible for more than half the Bitcoin hashrate. This centralization has always been a major concern for players. In November 2013, we had the first ban on Bitcoin in China, an event that added to the hack of Mt. Gox, which resulted in a drop of more than 80% in the price of BTC.

In February 2018, China announced it would ban the country’s cryptocurrency trading. Following, another legendary crash. It was past time for the market to deal with this problem.

Unlike the other bans, this time miners started an exodus from the country, which can solve two problems at the same time.

The hashrate migration can both help the issue of centralizing Bitcoin mining, as well as help the industry in the ecological transition. While China is a country whose energy matrix is ​​formed mostly by non-renewable sources of energy, the miners’ new homes can provide clean sources.

Therefore, despite the concerns resulting from this ban, experts in the crypto industry celebrated the geographic distribution of the hash.

New Green Initiatives

However, more than just changing the hash of the place, numerous announcements have been made to accelerate the ecological transition of cryptocurrencies.

Madison River Equity, a subsidiary of FX Solutions has announced that it plans to install 300 MW of solar energy in Montana. The project, which will be the largest solar energy installation in the country, aims at the sustainable mining of cryptocurrencies.

Wrapped announced a partnership with MOSS at the launch of the World’s First Carbon-Neutral Bitcoin-Backed Asset.

In partnership with Mattereum, the Lohko portfolio announced a gold-backed NFT with carbon offsets attached.

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