Bitcoin Drops to $42K – As Extreme Fear Grips the Market, the 4th Largest Whale Adds Another 43K BTC

By ssaurel | In Bitcoin We Trust | 6 Jan 2022

Just twenty-four hours ago I told you that if the Bull Market was not over, there was a possibility that the price of Bitcoin would test the $42K-$44K area as the formation of a descending triangle on a 1h-timeframe suggested.

This happened yesterday with a massive liquidation of over $600 million in a few hours for Bitcoin.

One can imagine that the release of the minutes of the last Fed FOMC meeting played a role in this liquidation. Indeed, the minutes showed that a rate hike could take place even faster than expected in 2022. This was enough to send the stock markets down, and thus the price of Bitcoin down as well.

Despite this, the decline was more than moderate in the stock markets with the S&P 500 still above 4,700 points and the Dow Jones still above 36,400 points:

The DXY continues to regain strength, as do 10-year U.S. Treasury bond rates. However, there is no reason to panic in my opinion. The markets have already priced in the upcoming Fed rate hike. A rise from 0% to 0.25% will not change much in the immediate future. Tapering will reduce liquidity in the markets, but there are still several months to go before it has a big impact.

In terms of market sentiment, that's all it took for most people to give in to extreme fear:

As I always tell you, extreme fear always precedes a great opportunity in the market. You may think I'm an eternal optimist for thinking this way, but you'll see that people with a much larger BTC holding than mine have a similar opinion.

For example, the 4th largest BTC address has just added another 43,000 BTC to its balance on the Bitcoin network. This wallet has never sold a single BTC in its history and now holds the equivalent of $5B:

While many are panicking that the Bull Market is over, the 4th largest Bitcoin Whale just added another 43K BTC. This should give you pause.

If a Whale with so much Bitcoin is taking advantage of this $42K dip to accumulate more, it's probably because they have a lot of confidence in what's in store for Bitcoin in the weeks and months ahead. This is in addition to BTC reserves on exchange platforms hitting a 4-year low, as well as miners' BTC reserves remaining stable.

So I maintain that we are not in a Bear Market, but rather in something resembling a Wyckoff accumulation:

The Wyckoff Method: A Tutorial [ChartSchool]

The current drop to $42K corresponds to the “Spring” phase. If this were to be confirmed, you can see big things are in store for the near future. We will see if this is confirmed in the coming weeks.

Another point of attention here is the Hash Rate of the Bitcoin network, which has dropped in recent hours due to the events in Kazakhstan. Dozens of people, including twelve police officers, have been killed, and several thousand injured, in riots that have rocked the country since Sunday, January 2, 2022, after a sharp rise in the price of liquefied petroleum gas (LPG).

It is in the streets of Almaty, the economic capital of the country, that the scenes were the most violent. A state of emergency was declared throughout the country on Wednesday by President Kassym-Jomart Tokayev, a few hours after the announcement of the resignation of the government, while Internet access was suspended in the country.

As you know, Kazakhstan is a major player in Bitcoin mining. This Internet outage has a temporary impact on the Bitcoin Hash Rate:

It remains to be seen how the situation in this Central Asian country will evolve, with the current situation proving to be very problematic for Vladimir Putin, the President of Russia. It is essential for Putin that the regime in place lasts because it is favorable to him. Here again, we will have to follow the situation in the days to come.

Finally, a word on an interesting metric regarding the Bitcoin network. The milestone of 700 million validated transactions on the Bitcoin blockchain has just been passed at the beginning of 2022:

It is something quite incredible that in the year 13 after the creation of Bitcoin by Satoshi Nakamoto, over 700 million transactions on the network have been processed. A major success that is still in its infancy, as the best is still to come for Bitcoin.

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ssaurel Verified Member

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