Capitulation of Bitcoin: SALE SALE SALE
By Ahmad Hassan
Capitulation can be best described as the period when individuals lose hope in their investments, they accept their losses and sell their assets in a panic. However, when this period of panic selling comes to a close, it may potentially be followed by either an upward trend or a sideways price movement that would indicate the beginning of a bull market. Capitulation periods are often followed by price reversals and a strong positive trend because these periods are sparked by FUD and panic which puts pressure on investors, reaching oversold conditions. It is important to note that the more violent and significant the drop in price, the higher the chance of it being followed by an even stronger rebound.
Novogratz said there are several factors that have undermined bullish momentum recently, including the May 17 federal tax deadline in the U.S. and comments from Tesla CEO Elon Musk, who expressed caution about bitcoin’s environmental impact and said the carmaker would stop accepting BTC payments for its cars (though Tesla did not sell any of its holdings).
It is a growing concern amongst traders that the 2021 bull market has come to a close and are debating whether they should lock their gains or not. The on-chain data signifies that long term Bitcoin holders have been hoarding BTC in preparation for a 2013 style double pump that would level the playing field and shoot BTC to an all time high.
Moreover, according to Glassnode, Long term holders (LTH) raked in profits early on in the 2021 rally that saw the price of BTC go from $10,000 to $42,000 before flatlining. Compared to the behaviors of Short term holders (STH) who increased their spending by more than 5x during the sell-off with the maximum spending taking place near the current low of the market. This is evident from the review of the Spent Output Profit Ratio (SOPR) for STHs, who actively realize losses through spending of coins accumulated at higher prices at the current low prices, a clear indication of capitulation.
To conclude, undoubtedly continued negative news will lead to a continued selloff and perhaps mass capitulation of new entrants who have been realizing losses throughout May if prices cross the $29,000 level. While LTH have not moved their position, it is evident that they are collecting these ‘undervalued’ bitcoin. The market is still fragile as the indicators of a bull market are slowly fading. However, according to ARK CEO Cathie Woods, as the economy moves towards renewable sources of energy it will make Bitcoin mining a greener industry and propel the renewable energy sector forward as well through economic incentives. She goes on to say, ““We were looking at all the indicators this morning, they’re all suggesting that we are in the capitulation phase, which is a really great time to buy. No matter what the asset is, capitulation is a buy. It’s on sale. “
References
https://ca.movies.yahoo.com/bitcoin-price-plunge-feels-capitulation-155602652.html
https://finance.yahoo.com/news/bitcoin-price-plunge-feels-capitulation-155602652.html
