Bitcoin Dip Buyers Rush in After Price Dips Below $33K

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By Yasin Ebrahim

Investing.com - Bitcoin turned positive Monday as its dip below $33,000 attracted buyers, though sentiment on the crypto remains vulnerable with long-term holders nursing their biggest losses since the outset of the pandemic.

BTC/USD was up 4.4% to $36,868.

BTC plunged to a low of $32,937 taking its losses to 52% since its November peak, the second worst selloff since the 2018 to 2020 bear market as investors fled risks assets on worries about the Federal Reserve tightening monetary policy.

Bitcoin is no stranger to gut wrenching selloffs, but this most recent slump has been beyond the norm for the popular cryptocurrency, and is “likely to change investor perceptions and sentiment at a macro scale,” Glassnode said.

“Drawdowns of this magnitude are markedly higher than the -20% to -40% range seen in the 2017 and 2020-21 bull cycle corrections,” it added.

Bitcoin was born during an era when the central banks worldwide were slashing rates, loading up assets on their balance sheets, and weakening, or debasing their currencies to kick start the global recovery following the financial crisis.

But these tailwinds, however, appear to be nearing an end, and BTC faces a new normal. 

“We were very favourable environment for the past few years where the balance sheets of central banks and the Fed have been exploding,” … but now they’re potentially acting in a much more responsible fashion,” Seamus Donoghue, VP Strategic Alliances at Metaco, said in a recent interview with Investing.com.

Still, the bitcoin faithful, or long-term holders, aren’t ready to throw in the towel just yet even as losses have piled up.

“This is the highest volume of LTH supply held at a loss since the March 2020 sell-off,” according to Glassnode.

The recent wild swings in the price of bitcoin, which often hogs the limelight and the headlines, shouldn’t be mistaken for dwindling interest or demand for blockchain technology, which remains on the up and up.

“This technology has proven itself as potentially more efficient than existing payment networks, which builds adoption for the space as a whole,” Donoghue said.

The increasing trend of adoption will eventually spur the all-important network effects that will likely underpin the long-term price of BTC.  

“The growth of the network will put a floor in the market eventually as more people have access to this [cryptocurrencies] … I think the network really drives the price longer term,” Seamus added.

“The issue we're facing right now is not a long term issue. It's something we'll face for 2022. But I think the underlying growth and adoptions and trends are extremely bullish longer term."