Last weekend, Bitcoin price fell below the psychologically significant USD 50,000 support level. In addition, the 50-day moving average was broken down and some popular technical indicators – such as the MACD – are flashing bearish warnings.
The confluence of downward price action, bearish signals and negative news flow (mainly; a rumors of US regulations being cracked down and the Turkish ban and double exchanges) suggests a bleak outlook for BTC … So, is Bitcoin doomed?
Recent decline brings Bitcoin’s Doomsday return, but there is still hope
Fortunately, there are reasons for hope. While short-term technical and sentiment signals are decidedly bearish, certain fundamental data suggests that the big bull market, which began in late 2020, still has legs. For example, the number of people who own Bitcoin, as measured by Glassnode’s Active Entities statistics, is still rising rapidly. Veteran crypto price analyst Willy Woo recently shared the following chart via Twitter:
De snelle groei is duidelijk zichtbaar vanaf augustus 2020 en houdt momenteel stand. | Bron: Glassnode
‘Anyone who thinks we are entering an extension[ed] price correction needs to know how many new users arrive on the network per day. We’re in the middle of a bull market with a hockey stick of new adoption, especially in the past two weeks, ” Woo responded.
Related reading | Bitcoin Price Breakdown: Bulls in Trouble While $ 50,000 Is Lost
Glassnode’s data is much more reliable than the naive method of counting total or active Bitcoin addresses to estimate user numbers – after all, each individual user can create a practically unlimited number of addresses to inflate such measures. While their exact methods remain proprietary, Glassnode tries to assign multiple addresses to individual users, counting only the last.
Drivers of user adoption in cryptocurrency
There are numerous factors driving user adoption, and one could easily point to Bitcoin’s increased visibility due to the new record high or the endorsement of influential business leaders such as Elon Musk and Michael Saylor. Increasing institutional adoption, involving major financial players like MasterCard and BlackRock, certainly doesn’t diminish the credibility of the coin in the popular mind either.
Related reading | Bitcoin loses important lifeline causing bull’s blood to be pumped
In the broader context, the deteriorating value of fiat is likely to play a major role in Bitcoin user adoption. Global inflation expectations – and indeed, observations – remain high. Central banks around the world pressed unprecedented amounts of new fiat to offset the economic damage from the government’s lockdown policy.
With the cost of goods and services rising and largely expected to rise, the widespread demand for deflationary monetary alternatives like Bitcoin makes perfect sense. This is especially true in the current context of underperformance due to traditional hard money options such as gold and silver.
Bitcoin price rises as more user adopt the technology | Source: BTCUSD on TradingView.com
As the adoption of Bitcoin by new users grows, the prospect of a protracted bear market seems unlikely. If adoption has grown during the bull trend, as Glassnode’s data indicates, it seems that higher prices are not deterring new entrants to the market.
With Bitcoin now trading “at a discount” from its recent all-time high of around $ 64,500, it is likely that enough demand, perhaps spurred by bargain-hunting, will remain in the marketplace to provide price support.
Featured image from Pixabay, Chart from TradingView.com