In Belobaba we always repeat that to understand what is happening in the market, you have to go to the fundamentals. You should not be overwhelmed by the day to day price.
Today we bring you a graph comparing the last three major Bitcoin (BTC) crises, the one at the end of 2017, the one in the summer of 2021 and the current one. And we compare two metrics, the Active Directions (DA) and the price.
The DA indicator shows the number of wallets or unique addresses that are active and transacting Bitcoin. To understand it, it shows the number of players.
Comparison of the 3 major Bitcoin crises
As we can clearly see in the graph, the 2017 crisis had a price drop of 64% and a DA drop of 47%. That’s like saying that half of the players left the field.
In this past summer crisis, the price dropped 52% and DA dropped 31%. In any market, if 30% of the players leave, you can be sure it will reflect in the price.
But here comes the interesting part. In the current crisis the price has already fallen by 38% but on the other hand, unlike the other two big crises, DA have only fallen by 5%!!!!
What does this mean?
First of all, in this crisis the players have not run away. We have also seen this in the sentiment analysis that we publish every week from Subutai, Belobaba’s AI (Artificial Intelligence) division. Unlike the May crisis, panic levels haven’t exceeded 45%.
BTC sentiment last 24h
Secondly, perhaps the players that remain in the field have become tough, they have understood that this is a market with great potential for profitability but with great volatility. Many of those who have come to Defi, have come to stay. That’s why we see the networks full of memes like this:
And finally, if the price has fallen by almost 40% but very few have left: what will happen when the fields fill up again with new players? We have to keep in mind that we are still 15% below the May 2021 DA number and 10% below the 2017 DA!!!!
To look at it from another perspective, from 360k DA lost last summer, we have only recovered 50%, that’s 180K. This is a scenario where the big traders have been drying up the market by accumulating BTC taking advantage of these price crises.
We will be very attentive to this DA indicator, that in case of a change of trend can be a clear sign of Bullish market.
Cheers to crypto!