On-chain analytics company Santiment has discovered that as the value of cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) dropped, traders were selling their holdings at a loss rather than making a profit from their trades. It is observed that, historically, bottoms are more likely to develop when the crowd is quitting their positions more frequently at a loss.
Santiment tweeted: “Bitcoin and Ethereum are both having more traders sell at a loss than at a profit this week, the first such week so far in 2023. Historically, once the crowd is exiting their positions more frequently at a loss, bottoms are more likely to form.”
A Cautious Approach for Investors
The prospect of higher interest rates being maintained for a longer period of time in order to bring inflation under control led to Bitcoin finishing in the negative for the third week in a row on Sunday. The primary inflation gauge in the United States reported readings that were higher than expected, which pushed the U.S. dollar closer to its yearly highs and caused riskier assets to generally decline in value.
The crypto market is also being affected by the regulatory crackdown that has been implemented in the U.S. as a response to the collapse of the FTX exchange. As compared to the 39% growth that Bitcoin’s price experienced in January, the gain in February’s price of the most valuable crypto by market value is disappointing.
By the time this article was written, the price of Bitcoin had climbed to a level of $23,402 by about 0.93%. In a similar fashion, the price of Ethereum rose by 2.2% to $1,637. According to analysts at Bloomberg, investors should proceed with caution with respect to Bitcoin’s expiring two-month run as history may serve as an indication.
Since March 2020, there have been five occurrences that are comparable to when the price of Bitcoin grew for two consecutive months, with the second set of gains being less than the first. There were four instances where it went down again in the third month, with a loss of 5.8% on average. There was an exception for Bitcoin only in February 2021, during a significant bull run.