The rampant rise of Bitcoin and its subsequent drops have already been compared to many events in the past. Yet, in a recent report by on-chain analytics platform CryptoQuant, startling parallels are being drawn between Bitcoin Unspent Transaction Output (UTXO) patterns and the ‘black swan’ crash of March 2020. As those of us engaged in the crypto industry would remember, in March 2020, the Bitcoin price had plummeted about 60% amidst the outbreak of the COVID-19 epidemic.
UTXOs are, in essence, the remaining units of Bitcoin left over after a transaction is executed. On-chain data, as interpreted by CryptoQuant, shows that at the end of August, a substantial 38% of these UTXOs were in loss. This level of UTXOs in loss metric is similar to the aforementioned black swan event of March 2020—a spike that hasn’t been observed since, until now.
On one hand, this could be read as a signal of market anxiety, as a high UTXO in loss might suggest that investors could be inclined to sell. On the other hand, it also could herald an opportune moment for bullish investors to step in and buy, similar to the bounce back Bitcoin experienced post the March 2020 crash.
At that time, even though Bitcoin nosedived to its lowest level since March 2019, it managed to rebound swiftly, showcasing the resilience of the leading cryptocurrency. This brings an interesting outlook to the current market situation.
Despite the data, the Bitcoin price continues to remain locked in a tight range, displaying no clear trend. More intriguingly, the current spot price seems to have found itself lodged between the acquisition prices of various investor cohorts, suggesting a delicate balance between profit and loss.
However, as with anything in the cryptoverse, it’s important to maintain a grain of skepticism. Remember that all indicators are signals and not certainties. Furthermore, such data does not substantiate as an investment advice or recommendation. They are merely observations when considering your own personal trading strategy.
With all that said, this raises the question: Could we be witnessing another unexpected selling event, much like the one we endured in March 2020? Or have we already been in its thick, quietly weathering the storm? Only time will reveal the answers.
Source: Cointelegraph
