Last weekend, Bitcoin price fell below the psychologically significant support level of $ 50,000. In addition, the 50-day moving average has been broken down and some popular technical indicators – like the MACD – are flashing bearishly.
The convergence of downward price movements, bearish signals and negative news flow (most notably a rumor about US regulators’ action and the failure of the Turkish ban and double swap) suggests dire prospects for BTC. So is Bitcoin doomed to fail?
The recent drop brings the return of the Bitcoin doomsday, but hope still remains
Fortunately, there are reasons to hope. While short-term technical and sentiment signals are decidedly bearish, certain fundamental data suggests that the big bull that started in late 2020 is still going strong. For example, the number of people who own Bitcoin – as measured by Glassnode’s Active Entities metrics – is still growing rapidly. Veteran crypto price analyst Willy Woo recently shared the following graphic on Twitter:
The rapid growth can be clearly seen from August 2020 and is currently stable. | Source: Glassnode
“Anyone who thinks we’re getting longer[ed] The price correction needs to know the rate of new users entering the network per day. We’re in the middle of a bull market with a new hockey stick, especially in the past two weeks, ”commented Woo.
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Glassnode’s data is far more reliable than the naive method of counting total number or active Bitcoin addresses to estimate user numbers. After all, any single user can create a virtually unlimited number of addresses to increase such measures. While their exact methods remain proprietary, Glassnode tries to assign multiple addresses to individual users and so only count the latter.
Driver of user acceptance in cryptocurrency
There are myriad factors influencing user adoption and one could easily point out the increased visibility of Bitcoin due to its new all-time high or the support of influential corporate leaders like Elon Musk and Michael Saylor. The increasing institutional acceptance by such large financial players as MasterCard and BlackRock certainly does not damage the credibility of the coin among the population.
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In the broader context, it is likely that fiat’s deteriorating value will play an important role in the adoption of Bitcoin users. Global inflation expectations – and indeed the observations – remain high. Central banks around the world were printing unprecedented amounts of new fiat to offset the economic damage of government lockdown policies.
With the cost of goods and services soaring, most of which are expected to increase, the widespread demand for deflationary monetary alternatives like Bitcoin makes perfect sense. This is especially true in the current context of the underperformance of traditional hard money options like gold and silver.
Bitcoin price rises as more user adopt the technology | Source: BTCUSD on TradingView.com
As long as the adoption of Bitcoin by new users continues, the prospect of a longer bear market is unlikely. If adoption has increased throughout the bull trend, as shown by data from Glassnode, then higher prices don’t seem to deter new entrants.
With Bitcoin now trading “at a discount” from its recent all-time high of $ 64,500, it is likely that sufficient demand remains in the market, possibly fueled by bargain hunting to provide price support.
Featured image from Pixabay, Chart from TradingView.com