28.10.202214:00 Forex Analysis & Reviews: Bitcoin drops the ballast

Buy and hold. A popular strategy for bitcoin, which was promised a bright future at the end of 2021, turned out to be unprofitable. From the levels of the November peaks, the token lost about 70% of its value, but not all of them got out of the longs. According to a study by Morgan Stanley, over the past six months, a record number of units of the cryptocurrency did not participate in transactions—about 78% of the total issue. The average break-even point for the remaining 22% is 22,300. Such statistics increase the risks of a serious collapse of BTCUSD in the event of a fall in quotes below 18,000. However, bitcoin found the strength to return above 20,000.

Dynamics of passive holders and break-even points for bitcoin

The passivity of the lion's share of holders underlies the collapse of the volatility of the leader of the cryptocurrency sector. This, in turn, contributes to the formation of consolidation ranges, which sooner or later give way to new trends. Rumors that the Fed and other central banks will slow down the speed of monetary restriction have become the main driver of the rally of risky assets led by US stock indices.

Bitcoin is no exception. It soared above 20,000, leaving a three-week consolidation trading range, the longest since settling above the psychologically important mark at the end of 2020.

Dynamics of Bitcoin Volatility

According to Genesis, BTCUSD quotes out of the range was associated with the largest short liquidation volume of $700 million since July 2021. Thus, sellers are running, and crypto enthusiasts who are in unprofitable positions are holding the asset, continuing to believe in its growth above the breakeven point at 22,300.

Meanwhile, despite falling volatility, a growing number of institutional investors are ready to join the crypto asset market. According to a Fidelity Investments survey of over 1,000 respondents, including hedge fund managers and financial advisors, 60% of institutional investors have invested in the crypto market. This is higher than 54% in 2021. According to 4 out of 5 experts, investment portfolios should include assets of this class.

Thus, neither the collapse of BTCUSD quotes by 70%, the fall in volatility, nor the story of ProShares, the first American ETF for bitcoins launched at the end of 2021 and lost more dollars than any other start-up fund, do not scare off investors. There is demand, the "bears" who are in disgrace are ready to endure and hold on to losses with their teeth. All this suggests that the bottom of the current peak of the token is slightly below 20,000.

Technically, on the BTCUSD daily chart, there is a retest of the upper limit of the consolidation range 18,200–20,100, formed within the inverted Splash and shelf pattern. The rebound from support at 20,100–20,200 will be the basis for the formation of longs. If the "bears" find the strength to return quotes below the fair value of 19,100, a false breakout pattern will be formed. There will be a signal to sell.