Analysts at crypto intelligence platform Santiment said Bitcoin's remarkable performance over the 29 days last month gave new definition to the leap year, but the market could be in for a different ride in March.
According to Santiment's monthly report, several on-chain indicators suggest that the market is in a certain danger zone and is at increased risk of a short-term correction.
A kind of danger zone
Bitcoin saw a 45% increase in February, jumping to over $45,000, $50,000, $55,000 and $60,000 in three weeks. According to data from CoinMarketCap, the asset was ultimately rejected at $64,000 and was around $62,000 at the time of writing.
The euphoria of the rally has triggered fear of missing out (FOMO) among market participants, albeit at a reasonable level.
FOMO aside, long and short-term active wallets may soon start selling their BTC as their average trading returns have increased significantly. Wallets active in the last 30 days recorded a gain of more than 20%, although this figure had fallen to 14% at press time.
Wallets active in the last 365 days recorded returns of over 64% (59% at the time of writing), the highest level since April 2021. These returns were not even recorded in November 2021 when BTC reached its all-time high.
Probability of a short-term correction
Additionally, Bitcoin whales are showing signs of dividing their holdings. According to Santiment, this happens when whales move some of their assets to or from exchanges to sell or hold. Additionally, they may be interested in transferring their coins to multiple wallets for security reasons. Fortunately, BTC share on exchanges is still at 2017 levels; Therefore, the assets are not yet moved to the platforms.
Historical data shows that extremely inflated average trader returns combined with weak whale accumulation would likely lead to a short-term correction.
“From there it would really depend on the crowd. Are they panicking? Do current traders who bought at $63,000 sell immediately when prices drop to $55,000? Will the whales collect these coins if the small traders actually panic? “Is the average age of dollars invested still going down when prices stop rising?” Santiment explained.
While the outcome of the recent on-chain movements remains to be seen, there is no denying that the crypto market is in for a wild ride.
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