Understanding the dynamics of the Bitcoin (BTC) market is critical for investors in volatile crypto assets. Maksim Balashevich, CEO of Santiment, shared his thoughts on what is happening in the market and explained why investors should be especially careful after the recent halving.
Bitcoin market dynamics have become significantly more complex
Historically, Bitcoin halving has become a harbinger of an increase in bullish sentiment in the market and, as a result, prices for crypto assets. However, Balasevic offers a more nuanced approach.
“Rather than simply counting the days after a halving until the next price peak based on previous halvings (one of the most common types of analysis) or calculating potential percentage growth (probably the nicest kind of analysis), we aim to raise more complex questions,” he said
Recent data from Santiment shows that different groups of BTC holders are pursuing different strategies. Large investors holding between 1,000 and 10,000 Bitcoins typically begin selling assets before a major rally begins. Conversely, smaller wallets with balances between 0.01 and 10 BTC often hold or accumulate coins even after the market has peaked.
Holders holding 100-1000 Bitcoins exhibit strategic buying and selling, often anticipating corrections. They respond quickly to changing market conditions, demonstrating professional and prudent behavior.
Balasevic notes that current market dynamics have become significantly more complex. While small holders are actively buying, larger investors are choosing to stay on the sidelines, indicating that they are taking a cautious approach in anticipation of a fall in the price of BTC.
Santiment MDIA Metric
Another key metric, Mean Dollar Invested Age (MDIA), tracks the average age of dollars invested in Bitcoin. Its growth indicates accumulation, signaling confidence in the growth of the asset price. Conversely, a decline may indicate profit-taking, hinting at possible market tops and subsequent declines.
“On a more positive note, the market has been in active reallocation for about 4-5 months, according to the Mean Dollar Invested Age metric. This suggests that the market may be preparing for a resumption of the bullish trend, which could potentially lead to a further reallocation of funds compared to the typical 12-month cycle seen in past years,” Balasevic explained. Moreover, as the market adjusts to the halving, the Net Realized Profit/Loss (NRPL) metric becomes critical. This tool measures the profitability of recent trades and sheds light on broader market sentiment. High NRPL values indicate that holders are taking profits.
“Notably, neither during the recent attempt to break $72,000 nor during the test of support at $61,000 did we see significant demand for profit taking. While some may see this as a strong signal, we know from the past that “strong hands” can become weak and mark the bottom once panic sets in,” warns Balasevic. In addition, Balashevich, the CEO of Santiment noted that by combining NRPL with MDIA and supply distribution metrics, investors will get a comprehensive view of the market.
