Despite the price drawdown, Bitcoin’s fundamentals remain strong as its value soars.
Yesterday, according to Coinmarketcap data, Bitcoin witnessed an over 10% plunge in its price, falling below $25,000 and briefly reaching $22,600. The last time BTC reached these levels was in December 2020. Consequently, altcoin dumped as well, with many experiencing over 15% price crashes, bringing the entire crypto market capitalisation below $1 trillion.
Traders Lose Significantly As Bitcoin Crashes
According to reports, 180,000 investors lost $520 million as Bitcoin slumped below the mid-20k range. Liquidated longs made up the bulk of the loss, with over 65% of losses incurred, while shorts accounted for the rest.
Meanwhile, the Okex exchange had the greatest liquidations, accounting for $186.74 million (36.05%) of the total. Binance followed in second with $124.90 million (24.11%) of the market.
Furthermore, Bitcoin liquidations were the most common, accounting for $225.72 million of the total liquidations in the last 24 hours. Second place went to Ether, with $167.26 million, while third place went to SOL, with $13.21 million.
Consequently, FUD around Bitcoin has now reached a fever pitch. Regardless, on-chain data shows that the core value proposition of the digital assets has continued to improve.
Bitcoin’s Value On The Rise
Bitcoin and the entire digital asset market have declined since the turn of the year. Several factors, including rising inflation and interest rate hikes, have played a significant role in the slump. However, several analysts, including Anthony Pompliano, have called for a reevaluation of Bitcoins thesis to get a clear picture of its underlying fundamentals.
According to Pompliano, the Bitcoin thesis represents the long-term value of the digital asset. It is also significantly different from the price and can not be interchanged with each other. However, several metrics indicate that Bitcoin’s intrinsic value is rising despite the price fall.
Source: Blockchain.com
Firstly, as prices fall, the Bitcoin network hash rate has continued to soar, hitting new all-time highs while quadrupling its value three years ago. According to Blockchain.com, the network’s hash rate is 227.74TH/s, over a 170% increase from the 84TH/s recorded last year after Beijing’s mining ban. Consequently, the transaction hash rate shows that the network has never been more secure than it is now.
Secondly, the on-chain distribution data for Bitcoin hodler shows that wallet addresses with 0.01 bitcoin, 0.1 bitcoin, and one BTC continue to reach new highs. Because this group differs from the typical whale wallet, it’s safe to assume that they are purchasing and hodling while larger addresses have been selling.
Consequently, as retail hodler continues to grow, Bitcoin’s transaction metrics look healthy. The number of active addresses and total successful transaction count remains in line with their historical ranges. As highlighted by another analyst, Will Clemente, the situation has led to a decrease in cost basis for short-term holders and an increase for long-term holders.
According to Clemente, both metrics are getting close. If they persist in their current trajectories and STH falls below LTH, it will signal generational Bitcoin buying possibilities.
Source: Blockchain.com
Finally, the growth of retail holders and increasing activeness of address has not caused a spike in the average transaction cost for Bitcoin. The average transaction fee is currently under $1.50, and unlike in previous runs to ATHs, the last surge in 2021 did not cause a spike like in 2017 and early 2021. Much of this improvement has been down to innovation in layer one solutions and the growth of the lightning network, which continues to hit new highs.
Consequently, what is clear from the above is that global macro headwinds cause Bitcoin’s downward price movement. These have precipitated in causing a selloff across the financial market. However, these metrics show that Bitcoin remains an attractive store of value in the long term.
Do you think Bitcoin offers a good store of value for the long term despite the current selloff? Let us know your thoughts in the comments below.
Chris is a crypto enthusiast and a firm believer in the blockchain’s ability to create a new financial paradigm. Through writing, Chris hopes to expose the intricacies of this disruptive technology and how it is beneficial to Africans and developing countries. He aims to give readers a rational and unbiased outlook of the industry by equipping them with the necessary information to make enlightened investment decisions.
