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Highlights
- Bitcoin price crashed 14% in the past five days, prompting liquidations worth $1 billion.
- Worsening global economic conditions and fears of recession grip the markets after Friday's weak job data.
- On-chain metrics suggest that a further drop in BTC should not surprise investors.
Bitcoin price crashed from a high of $70,135 to $60,465 in the past five days, registering a 14% drop. The bearish momentum was not localized to crypto markets but also to the stock market. The sudden downturn could be attributed to the macroeconomic and recession concerns following the recent jobs data.
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Bitcoin Crash Wipes out $1 Billion Liquidations
According to data from CoinGlass, the 14% crash in Bitcoin price over the past five days has resulted in roughly $1 billion worth of positions being liquidated. Despite this brutal sell-off, it is unclear whether Bitcoin price will stabilize here.
The same bearish outlook can be seen across the US stock market, which has resulted in the Nasdaq dropping 2.4% and the S&P off 6% from its recent all-time high.
Why Crypto Markets Are Crashing?
Recession concerns in the US were exacerbated after Friday’s weak jobs report, triggering a market-wide crash. Many pointed to the Sahm Rule Recession Indicator, which hit 0.53%, well above the recession threshold of 0.50%, signaling an economic downturn.
According to FRED, Sahm Rule is an indicator that signals recession when the three-month moving average of the national unemployment rate (U3) rises by 0.50 percentage points or more relative to the minimum of the three-month averages from the previous 12 months.
However, Peter Berezi, BCA Research’s Chief Global Strategist and Director of Research, shot down these concerns, saying, “Sahm rule was technically NOT triggered today.” Berezi added that FRED’s decision to round up “all the past unemployment rates” has led to the signal flashing 0.53% instead of 0.49337%.
However, BCA Research’s Joshi Rule has signaled recession after flashing 0.23%, well above the “Event Horizon” level of 0.2%. Joshi Rule measures the three-month moving average of the unemployment rate of permanent job losers and not temporary layoffs. If this average rises by 0.20% from its low during the previous 12 months, it signals the start of a recession.
Time To Buy The Dips?
Despite the recent Bitcoin crash, Santiment’s 365-day Market Value to Realized Value (MVRV) currently hovers around 8.2%, well above the zero mean level. This metric indicates that investors who purchased BTC in the past year are at an average profit of 8.2%.
If the MVRV dips below a certain threshold, short-term holders will capitulate, allowing long-term holders to purchase BTC at a discount. In this case, the 365-day MVRV has not slipped below the zero level since March 2023. Thus, investors should not be surprised if Bitcoin crashes lower, allowing this indicator to hit negative levels.
According to IntoTheBlock’s Global In/Out of Money, roughly 5.53 million addresses purchased 2.24 million BTC at an average price of $55,501.These investors purchased their holdings between $41,700 and $62,000 and are close to hitting break even and will do so at around $55,500. However, these investors are typically likely to add more to their holdings if the price slides toward their average entry level. Therefore, the $55,500 is a key support level that needs to be held for the bull run to resume.
Santiment’s 365-day MVRV suggests that a further downside is likely, and IntoTheBlock’s GIOM suggests that long-term investors could get a better opportunity to accumulate BTC around the $55,000 region. To conclude, Bitcoin price forecast outlines that BTC could dip lower.
Frequently Asked Questions (FAQs)
1. What triggered the recent Bitcoin price crash?
2. How much has the Bitcoin price dropped in the past five days?
3. Is the Sahm Rule Recession Indicator signaling a recession?
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