On-chain expert believes there is some positivity behind most recent plunge
As per data shared by on-chain analyst willy wooBitcoin’s drop to $21,000 was mostly due to a selloff on the 3AC scale by institutional traders, but there is some positives.
As the analyst suggests, this sell-off was tied to a negative net flow of coins on exchanges, which may suggest that the majority of market participants have entered the accumulation “mode” and were actively buying cheap coins to store in their cold wallets during the plunge.
Earlier this summer, we did not see an influx from centralized exchanges, as traders were mostly providing additional liquidity to finance their short positions, while not actively buying any coins at their absolute lows.
Regardless of positivity around the Bitcoin net flow on exchanges, the current move to $21,000 is a manifestation of the problems around the cryptocurrency market caused by the negative macro environment for risk-on assets like Bitcoin or Ethereum.
Unfortunately, it is not yet clear whether the bear rally will continue as there is no sign that BTC has bottomed out.
DXY rally
As we have mentioned in our previous articles numerous times, the rally of the U.S. Dollar against the bracket of foreign currencies is one of the main sources of pressure on the digital asset market.
With a successful bounce off the 50-day moving average, DXY rose to new highs following a local correction, which started a rally in the stock and digital asset markets. Looking at the inverse correlation between the assets, it becomes clear that with the current rate hike cycle, the crypto market is unlikely to see a massive recovery.
As Willy Woo himself suggested, the crypto market might enter a prolonged consolidation like what we saw back in 2018.
