Bitcoin (BTC) is in a close battle between bulls and bears and the network is now reacting, data shows.
Trackers reveal that this week, Bitcoin’s difficulty snapped an 18-week green streak to record its first decline since July.
Difficulty adjusts for BTC price drop of 20%
Amid short-term cyclical price action, concerns remain that Bitcoin has not finished falling back from its last all-time highs of $ 69,000.
Having shocked analysts and even rejected a historic pricing model, the BTC / USD pair for the past month feels like uncharted territory, despite nearly doubling on the year.
“With Bitcoin now more than 20% below the all-time peak, traditional media headlines have declared that Bitcoin has entered a bear market,” summarized on-chain analytics firm Glassnode in its latest weekly newsletter, “The Week On-Chain “.
“However, it may come as a surprise to some readers that this current market correction is actually the least severe in 2021. Some might even say it remains the same for a Bitcoin HODLer.”
Nevertheless, the fundamentals of the network are now taking into account the latest drop. On Sunday, the difficulty fell 1.5%, after rising continuously for nine consecutive periods. Currently, the next adjustment is scheduled to produce a further decrease of almost 2%.
Long-term holders’ spending creates “uncertainty”
Examining the outlook, Glassnode did not rule out further price declines.
A combination of long-term holder sales, high open interest in derivatives markets and other phenomena could cause a continuation of the downtrend to new local lows.
“Open interest leverage on options and futures at or near historic peaks, which is cause for some concern regarding increased potential for ‘flush out’. The financing rates suggest a only slightly positive bias, which makes scenarios of both long and short strategies plausible ”, concluded.
Regarding the behavior of the historical minimum, he added:
“Long-term holders have distributed 5.8% of the accumulated supply since March and there is some uncertainty based on their spending patterns.”
In the meantime, When discussing open interest, analyst Willy Woo noted that in a post-ETF environment, activity may remain higher and may not necessarily signal turmoil on the horizon.
“In my opinion, it does not need to be emptied”, tweeted.
“It could be a sign of the time with the absorption of cash and carry trade futures ETFs.”
The BTC / USD pair was circulating at the $ 56,000 level at the time of writing on Thursday after spending the last 24 hours repeating a rally to $ 59,000 and subsequent rejection.
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