Bitcoin Bloodbath: USDT Liquidity Falling, Will BTC Drop To $47,000?

Bitcoin traders and holders are having a rough time.

For three straight days now, BTC has been dropping, even crashing below the psychological $60,000 mark.

What this means is that the coin is now down 9% this week and roughly 20% from May highs. We don’t have to gauge how far the coin is from all-time highs because it may be disheartening.

Will Bitcoin Drop To $47,000?

As the brutal sell-off continues, on-chain data points to a possible capitulation that might see the coin tumble below May 2024 lows and as low as $50,000.

Here’s why:

Citing the profitability of short-term holders (STHs), one analyst says the maximum pain for these entities, mostly speculators or traders or those who bought within the last 155 days, sits at around $47,000. This is about 20% from the current level, meaning Bitcoin, though in red, stands to drop even more in the days to come.

The $47,000 level, lower than the psychological round number at $50,000, could anchor bulls, acting as a critical support zone. If this preview is valid, those who choose to exit can wait for prices to recover around this line and enter.

Before then, the analyst expects more shakeouts, potentially triggering panic selling.

The good news is that we can cycle back to the past and compare what’s happening now to then.

Is There Hope? USDT Liquidity Falling

While STH losses haven’t reached dramatic levels yet, mirroring the initial phase of the 2019 correction, history points to the possibility of a steeper decline and panic selling emerging later, similar to the final 100 days of the 2019 correction.

While convincing, traders should know what history tends to rhyme and won’t play out exactly like before.

Interestingly, as Bitcoin dumps, there is a wave of buying pressure.

For some reason, the analyst observed that exchanges, without specifying which, are busy loading up the dips, explaining the spike in trading volume.

Their activity means that they are artificially propping up prices. Without their participation, BTC would already be hoovering at the $50,000 level.

The reason, well? Exchanges are buying, but USDT liquidity is fast falling. Historically, whenever the USDT liquidity index falls, BTC prices tend to follow. For now, dropping USDT demand means purchasing power is weakening, with most investors opting to wait on the sidelines until prices recover.

Bitcoin Favors The Diamond Hands

Despite the current turbulence, there is hope. Believers who have been buying and holding the coin for years are in the money right now despite the 20% plunge from May highs.

As irrefutable on-chain data shows, LTHs have been outperforming over the years. However, holding means they must be diamond hands and overcome the psychological toll occasioned by sharp dumps and extreme market volatility.

Data shows that only a tiny minority, roughly 2%, have the fortitude to buy at market bottom (like in November 2022 or December 2018) and wait for the eventual peak before selling.

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Disclaimer: Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.