Bitcoin Approaches Monthly Support As Systemic Risk Event Unfolds

4 min readMay 9, 2022

Bitcoin fell through $36,000 on the back of TerraUSD offloading coins due to the foundation’s deteriorating financial situation. The coin dropped as low as $33,000 and has yet to experience a relief rally in what is now the longest weekly down-trend ever recorded.

However, the systemic risk event has been met with robust absorption so far and the circumstances highlight unusual selling pressure.

Let’s dig in.

Dear readers,

The purpose of this newsletter analysis is to provide context to current events and cryptocurrency markets. It is released every Monday and Wednesday. I am not perfect and this is not a science — nor is this newsletter a signals service. While I cannot promise perfection I do my best to be honest and transparent.

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Do Kwon’s TerraUSD Contributes to BTC plummet Below $34,000

Considered a saviour of the crypto market back in March with a billion-worth buying spree of Bitcoin, the Terra Foundation has released a statement revealing that it contributed to the price drop below $34,000.

Read the full article here!

Technically speaking

Bitcoin Approaches Monthly Support

Bitcoin/Dollar is still in a down-trend, having lost 52% of its value since the all time high in November.

BTC/USD exchanges hands at $33,500 at the time of writing and is experiencing selling pressure which has yet to relent. Technical headwinds, the macro-economic environment and the latest revelation from the Luna foundation have underpinned the persistent downtrend, which has reached record levels in weekly terms.

Indeed, BTC/USD has dropped 16% for six consecutive weeks. The last time the market experienced such selling pressure was in 2014. In terms of immediate price-action, BTC/USD is within a high value area as it approaches monthly support at the $30,000 psychological level — the average entry price of Michael Saylor.

Until $36,600 is reclaimed on the daily time-frame, continuation of the technical downtrend could ensue. Zooming out, the macro-range of $30,000 — $69,000 remans in tact for now. The bitcoin fear and greed index has reached a reading of 11 — a level not seen since Jan. 23 just one day before BTC/USD bottomed out at $32,800.

Notably, the Luna Foundation event likely caused a spike in the Bitcoin velocity chart as the foundation deploys its reserves and rebalances its holdings.

Counterintuitively, in such fearful and extreme oversold conditions, the historical precedent is to take the opposite end of the crowded trade. After all, where nobody anticipated the March 2020 capitulation event, everyone and their mother is calling for it this time.

Bitcoin Absorption Taking Place Regardless

Despite the market downturn and prevailing negative sentiment, on-chain data indicates robust macro absorption — not snowballing distribution as many analysts are saying.

Between $33k-$47k $btc has been in a strengthening accumulation trend. Value buyers are coming in and removing #btc from exchanges. Removing supply from exchanges signals hodl intentions, adding supply signals seller intentions. pic.twitter.com/g3QtH4ITsv
- Chris on Crypto (@ChrisOnCrypto1) May 8, 2022

The exchange net-flows are corroborated by ‘hodler’ behavioural data points. Despite 41% of the bitcoin circulating supply sitting in a loss, 7.7 million BTC has shown no indication of being ‘offloaded’. This is the highest amount since April 5th, 2020. A shift in exchange net-flows would indicate that long-term holders are looking to distribute their coins. This is not happening.

Finally, Bitcoin’s entity adjusted dormancy flow is at bottoming levels. Designed by David Puell, it is the ratio of the current market capitalisation and the annualised dormancy value (measured in USD).

$BTC will bottom soon. It may already have done so. Buy the fear. Wait. #btc pic.twitter.com/tmsSpAXcPZ
- Chris on Crypto (@ChrisOnCrypto1) May 5, 2022

Briefly, ‘Dormancy’ is defined as the average number of days destroyed per coin transacted in any given day. ‘Destroyed’ coins is an attempt to measure the real economic activity of bitcoin by multiplying the amount of each transaction by the number of days coins were last spent. That way, fake economic activity is discarded, separating the noise from the signal.

Retail appears to be caught in a pvp (player-vs-player) whale market for now. But all in all, robust accumulation is taking place within a climate of extreme fear and a systemic risk event unfolding in real time.

p.s. This is my opinion. It is not financial advice.

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