Bitcoin has recently experienced multiple record highs, followed by several downward corrections. However, this does not seem to have shaken the market’s belief in BTC, as it is still expected to continue to rise. This article is sourced from a tweet by Alex Thorn, the head of Galaxy Research, and compiled and written by Foresight News.
On a foggy morning in New York City, some of us are feeling a bit disoriented due to the recent storm in the cryptocurrency market. Today, I have some new thoughts on the Bitcoin revolution and its intrinsic value. But before we delve into that, let’s discuss what happened in the crypto market yesterday and what it means for the bull market.
On March 5th, the price of Bitcoin on Coinbase reached $69,324, surpassing the previous all-time high set on November 10, 2021. Bitcoin then experienced a $10,000 fluctuation and is currently trading at around $67,000.
Yes, after 846 days, Bitcoin is back. Both physical gold and digital gold have reached historical highs. This is the first time that BTC and XAU (spot gold) have simultaneously reached record highs, but it won’t be the last.
However, Bitcoin is still not suitable for beginners. After reaching a new high, Bitcoin immediately plummeted by 14.3%, with an intraday low of $59,224, leading to a situation of long and short liquidations in the futures market.
Within just one hour, from 2 PM to 3 PM Eastern Time, $400 million worth of Bitcoin long positions were liquidated, further exacerbating the capital withdrawal. In the past 24 hours (as of 7 AM on Wednesday, March 6th, Eastern Time), the amount of long liquidations on cryptocurrency futures exchanges exceeded $800 million (over $1 billion if short liquidations are included).
Regardless, all of that is in the past now, as the current trading price of Bitcoin is back to $67,000, which is actually $4,000 higher than the opening price on Monday morning. Volatility has returned, and when we overcome the “Wall of Worry,” volatility may continue to persist.
Speaking of the “Wall of Worry,” it is a metaphor that originated on Wall Street, referring to the collective concerns that investors have, including economic recessions, inflation, political or geopolitical issues, and more.
Now, let’s talk about the background of the previous all-time high. Bitcoin didn’t have an easy journey. In 2020, it took 16 days for Bitcoin to finally break through the previous ATH (around $20,000 on December 17, 2017) after touching it for the first time.
In fact, after two touches of the high point, the price of Bitcoin experienced a 12.33% decline before rebounding.
From a psychological and technical analysis perspective, the previous all-time high was a significant resistance level, which is perfectly reasonable. Specifically, my mom told me that she sold some Bitcoin at a price of $68,850 yesterday.
I don’t know how she managed to sell at the exact high point; she must not be as diamond-handed as I am. Nevertheless, I can’t let go of my chips.
However, some long-dormant Bitcoin (old coins) did wake up yesterday, and their sell-off may have caused the intraday top. On-chain data indicates that a significant amount of Bitcoin mined in 2010 was transferred on-chain yesterday, suggesting that these Bitcoins were sold. Everyone has a psychological price, and if it’s the same person and they indeed sold Bitcoin, they may have wanted to sell and exit at the high point in 2021.
I guess you can be a diamond hand for 14 years and then find your holdings To The Moon. The characteristic of every Bitcoin bull market is that old users transfer coins to new users, which is why Bitcoin holders grow in size. (I want to point out that this holder can easily consolidate the Bitcoins they mined into a new custodial wallet. At least I haven’t seen any on-chain evidence indicating that these Bitcoins were sent to cryptocurrency exchanges.)
In fact, if we look at the Coin Days Destroyed (CDD) indicator, we can see that movements of dormant Bitcoin often mark the peak of a bull market or the bottom of a bear market.
This indicator takes the number of tokens in a transaction (or all transactions on a given date) and multiplies it by the number of days since the last transfer of these tokens. For example, if I buy 1 Bitcoin today, put it in a cold wallet, and eventually transfer it on-chain after 300 days, my transaction would contribute a CDD value of 300. With the recent increase in the price of Bitcoin, we can see higher CDD values.
By the way, some of these peaks (such as the one in early 2022) were caused by special circumstances (the peak in early 2022 was due to the US government seizing $3.6 billion worth of Bitcoin from the Bitfinex hackers earlier on February 22).
When the US Federal Reserve seizes these Bitcoins and transfers them to wallets under their control, it disrupts the CDD indicator. However, we have not seen a large influx of dormant Bitcoin into the market – it seems that the market needs to go higher to shake off OG.
Yesterday, the daily trading volume of Bitcoin ETFs reached a new record high, surpassing $10 billion. It was the biggest inflow day for Bitcoin ETFs ever and the second-largest net inflow day since their listing (a net inflow of $648 million).
The net inflow of Bitcoin amounted to over 10,000 coins (over 10 times the daily production of Bitcoin, which is about 950 BTC). The growth of ETFs is truly astonishing. As I wrote last week, the influx of funds is not only continuing but also seems to be accelerating. This momentum won’t stop, and it will continue.
There is no doubt that as the bull market continues, we will climb the “Wall of Worry.”
Bull markets are non-linear and filled with significant corrective moves. According to my statistics, from January 1, 2017, to December 17, 2017, when Bitcoin reached its previous ATH of around $20,000, Bitcoin experienced 13 declines of more than 12% (with 12 of them being drops of over 15% and 8 drops of over 25%).
The same story repeated in 2020. From the low point during the COVID-19 pandemic on March 12, 2020 ($3,858) to April 14, 2021 ($64,899), Bitcoin had 13 pullbacks of more than 10% (with 7 of them being drops of over 15%).
Therefore, yesterday’s price movement doesn’t make me think that Bitcoin won’t rise again. Although my readers won’t be surprised by my belief that Bitcoin will rise. We are giving the new friends who hold Bitcoin ETFs a baptism by fire in terms of Bitcoin’s volatility.
It’s just the “Dalai Lama” price pattern (which is an old meme, but it’s effective). For the sake of entertainment, I debated the intrinsic value of Bitcoin with the same person yesterday. I know it’s not the most efficient use of time. Satoshi Nakamoto once wrote:
“Well, I really hope you didn’t waste your time. This person believes that the US dollar has intrinsic value because it is backed by the “full faith and credit” of the US government. I find this amusing, not because the US dollar doesn’t have the full faith and credit of the US government backing it, or that such credit has no value, or won’t have value in the future. I can make those arguments.
But to me, something having intrinsic value means it can be consumed. Oil can be burned for engine power, corn can be eaten, and even gold can be turned into decorative jewelry (I guess that’s technically important). So, I don’t think the US dollar has intrinsic value unless you plan to burn your money to keep yourself warm. Indeed, money instruments don’t need to have intrinsic value, and I think that today’s fiat currencies don’t have any intrinsic value. In fact, it might be better for money not to have so-called intrinsic value. After all, money is a tool that we can use to store the fruits of our labor for trading across space and time, rather than having to physically transfer our labor or property every time we want to transfer wealth.
Why complicate this tool with a bunch of other use cases that may only diminish its utility? Bitcoin just takes this concept to the extreme, almost like Satoshi Nakamoto was thinking, “What if we can have all the properties of fiat currencies without any of its drawbacks? What would happen if we can have an alternative, easily transferable, divisible global currency that is weightless, not issued by any central bank, and (by the way) has a fixed supply mathematically?”
This person wasn’t ready to accept this argument and countered me by saying:
“The powers that be – the elites, entrenched intermediaries, and so on – want you to believe that the world is static, the system is secure, institutions are permanent, everything has been figured out, and nothing has ever changed. Turmoil in the past? We’ve solved that problem. Haven’t you read the textbooks? You cannot possibly come up with novel solutions that nobody in the past 5,000 years of civilization has thought of. Reinvent money? We solved that problem on Jekyll Island in November 1910. These ideas are silly.”
The world is much more complex and ancient than people realize. Revolutions are disruptive precisely because they overturn existing orders, but revolutions are only in the textbooks. If a revolution doesn’t subvert established systems and ways of thinking, it won’t make it into our textbooks.
So, everything is still not figured out. Human progress, just like the Bitcoin chart, is non-linear. As we search for enlightenment, we hop and skip, questioning ourselves and our previous assumptions. Innovation requires discarding or at least constantly expanding past ideas. The more things change, the more they stay the same, but things do indeed change.
Friends, fasten your seat belts; our journey has just begun. Have faith, and if you can, keep your Bitcoin in your own wallet and enjoy the greatest game in the market’s history.
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