Willy Woo, a Bitcoin on-chain analyst shares his thoughts as to what just happened with the Bitcoin crash, and where we are headed next.
Below is that news letter he shared on Twitter:
Derivitives leverage climbed to all time highs as traders tried buying the dip with leverage as price slid down to $38k (open value in perpetual swaps).
We were already seeing tidal waves of coins flowing into exchanges to be sold, whales dumping out quite young coins. From the profit they were carrying, my guess is these buyers came in at the January rally from $24k->$40k.
Sufficient spot selling was achieved to start the mother of all liquidations. We had a $38k->$30k within minutes with a cascade of long liquidations as one long dumped out on top of the next below it.
Leverage is now flushed from the system. $3.2b of liquidations in total. Capitulation completed.
Exchange flows now have switched strongly bullish.
Coins moving from strong hands to weak hands (Rick Astley) has peaked and momentum is now shifting back to strong hands. The last time I saw a peak this big was at the bottom of the COVID crash, signaling a bottom recovery.
Weekly SOPR showing coins moving are carrying losses, we have a full SOPR reset. A very good time to buy in a bull market. Sellers are now selling at a loss.
Are we in a bull market? Long range macro indicators like NCT Ratio are very healthy, that remains unchanged. So yes, this is not a mania top which all BTC bull markets end in, price is BELOW fundamentals, not above it. We are still halfway.
Organic valuation estimation (NVT Price) is around 55k, coins are extremely cheap right now, cheaper percentage-wise from organic valuation than the bottom of the COVID crash.
New users seen on the network have actually INCREASED marketdly since Elon tweeted at $55k. New users have been buying this dip, the publicity has been good for Bitcoin. Small retail owning less than 1 BTC continue to grow at increasingly healthy rates, completely unperturbed by this flash crash. It’s still a bull market.
Newish whales dumped out, retail bought a chunk of the dip, coins getting more distributed, I’ll take that as a win.
The big question I have is whether we get a faster v-shaped recovery or longer sideways band of re-accumulation. Either way I think this will take time for the tidal wave of coins that were dumped the few last weeks out to be re-accumulated.
It’s becoming clear what kinds of shapes over leveraged derivative markets put on BTC’s price chart. See COVID2020, 2018 bear market capitulation and this week’s Elon Dump; sheer cliffs of terror.