Yesterday, Bitcoin stayed at around $57,000 after losing almost 10% in value over the past week. Over the past 24 hours, it has remained flat. In comparison, Ethereum gained 5% and Solana rose by 8%.
Earlier this week, quite a few traders liquidated long positions. Analysts attribute this to rising leverage, potentially a sign of froth in the crypto market. Bitcoin’s long-term uptrend will be sustained insofar as there is support above $53,000.
Slight drawdown is typical after ATH
At the moment, the flagship crypto has lost about 13% from its all-time high of around $69,000. It’s normal to expect a slight drawdown after a peak. Losses can exceed 10% even within a bull market. Bitcoin remains vulnerable to deep corrections over the long term. Before a price recovery occurs, drawdowns appear to be limited around 50% to 60%.
According to several analysts, however, the current losses signal further downside. Alex Kuptsikevich, an analyst at FxPro, wrote in an email to CoinDesk:
A drop in total capitalization of another 5% would signal the onset of a bear market, assuming cryptocurrencies live by the same laws of psychology that underpin technical analysis. The sell-off in cryptocurrencies from the May peaks ended only after the market lost more than half its valuation. The odds have significantly increased that the bears are aiming to sell the rate down to the $48K level, although there are still a few significant stops along the way.
Layer 1 tokens outperform Ethereum
This year, the ascent of alternative layer 1 ecosystems has been a key theme. A number of networks saw a boom in use. These included Solana, Terra, and Avalanche. They performed remarkably well compared to Ethereum, particularly after the market picked up after June 2021.
Future outlook for hodlers
Bitcoin holders seem unphased by the decline for now. At the moment, blockchain data shows steady demand for Bitcoin and no Bitcoin selling. On Friday, crypto data company Glassnode tweeted:
Even after a near 20% correction of the all-time high, long-term BTC holders do not appear to be spending their coins in panic. After peaking at 13.5 million BTC, long-term holders have only distributed 100K BTC over the last month, representing just 0.7% of their total holdings.
However, a potential drawdown in Bitcoin’s price could provoke a reaction from long-term holders. There have been some extreme predictions, such as Bitcoin dropping to $48,000 by the end of November.
