After a prolonged market correction, the number of Bitcoin addresses at a loss has reached a two-year low in late January.
Dip buyers waiting to move into the profit zone
“You have to take the good with the bad” has never been more true than in the 2022 crypto markets.
Although the ROI on Bitcoin exceeded the return on all traditional financial assets in 2021, those who bought in too late are left wondering when their trade will turn green. A record amount of Bitcoin addresses are currently trading at a paper loss, as indicated by data from Glassnode, a blockchain analyst firm. As of January 28, 2022, 13.7 million Bitcoin addresses were in loss on a seven-day moving average basis, a 21-month record high.
Source: Glassnode
This is hardly surprising, with Bitcoin trading at a discount of almost 40% compared to its November high. However, throughout the last 21 months, the cryptocurrency has seen several price rallies, the last one lifting BTC from its local bottom of $40,000 AUD to its record high of $95,000 AUD. Analysts are expecting more of the same in the future, although the coming months could see more volatility for the world’s largest crypto asset.
What could be in store for Bitcoin in 2022
The good news is that despite a record amount of Bitcoin addresses in the red, there is also a record amount of Bitcoin addresses overall, meaning more people are getting involved.
That leads crypto exchanges like Coinbase to believe that even if a bear market hits, it will not be as brutal and long-lasting as the last one in 2018. A significant amount of investors holding Bitcoin for unrealised losses also means more addresses that should hold until BTC reaches profitable price levels. If anything, Bitcoin’s 13-year history has taught us that HODL is the dominant strategy and that patient investors win at the expense of impatient ones.
As of the end of January, almost 88,000 Bitcoin addresses were worth seven figures in US dollars. However, that number has plunged from more than 116,000 dollar millionaires at the end of October. Those looking to make life-changing gains can console themselves with Bitcoin’s growth prospects, though.
According to Michael Bucella, the general partner at BlockTower Capital, Bitcoin is still in growth mode if we look at very high time frames:
“Bitcoin is still firmly in growth mode, and if you look at a logarithmic chart, it’s still a long term bull trend. It’s still a young asset class, this is not all too surprising volatility, and Bitcoin and Ether were structurally low and declining over the last year.”
Bucella affirmed that Bitcoin’s fundamentals still point to more long-term growth. The asset was only more likely to be seen as a store of value in the future and volatility was simply part of the growth path. That coincides with the interpretation of many analysts who affirm that repeated market corrections are nothing more than a redistribution from “strong hands” to weak hands.”
Bitcoin holders in loss should be pleased to hear that.