There are early signs that the dust is settling on the cryptocurrency market now that investors believe the worst of the Terra (LUNA) crash appears to be over. The Bitcoin chart indicates that while the drop was widespread and quite devastating for altcoins, BItcoin (BTC) has held up quite well.
Even with the May 12 drop to $26,697 marking the lowest price level since 2020, several metrics suggest current levels could represent a welcome entry into BTC.
The pullback to this level is notable because it was a retest of Bitcoin’s 200-week EMA at $26,990. According to cryptocurrency research firm Delphi Digital, this metric has historically “served as a key area for previous price lows.”
And it wasn’t just Bitcoin that had a rough day on May 12. The stablecoin market also experienced its highest level of volatility and deviation from parity with the dollar since the beginning of the Terra saga, with Tether (USDT) experiencing the largest deviation among major stablecoin projects as shown in the chart below from blockchain data provider Glassnode.
The top four stablecoins by market cap have managed to get back to within $0.001 of their dollar parity, but the confidence of cryptocurrency holders in their ability to hold has definitely taken a hit from the events of the past two weeks.
Bitcoin Approaches Its Realized Price
As a result of the market pullback, the price of Bitcoin is currently trading the closest it has been to its true price since 2020.
According to Glassnode, Realized pricing has historically “provided strong support during bear markets and provided signals of market bottom formation when the market price trades below it.”
Previous bear markets saw the price of BTC trade below its realized price for long periods of time, but the amount of time has actually decreased each cycle with Bitcoin only spending seven days below its realized price during the 2019-2020 bear market.
It remains to be seen whether BTC will drop below realized price if current bear market conditions persist, and if so, how long it will last.
On-chain data show that many cryptocurrency holders could not resist the temptation to acquire Bitcoin below $30,000, resulting in an increase in accumulation starting on May 12 and continuing until May 15, but some analysts warn that this is not should take as a sign that a speedy recovery will occur from here.
If history is any indication, most #BTC Bear Market bottoms form quickly, in a volatile manner
But the accumulation ranges that form afterwards take time
— Rekt Capital (@rektcapital) May 13, 2022
This sentiment was echoed by Delphi Digital, which noted that “The longer we see a price increase in these areas, the more likely it is to continue.”
“Should this happen, look for the following levels: 1) weekly structure and volume structure support at $22,000–$24,000; 2) 2017 all-time high revaluations of $19,000 to $20,000.”
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