The blockchain and crypto analytics firm helps the average trader understand what exactly happened for the price of BTC to fall to $3,600.
Chainalysis posted their report for the BTC market for March 2020. According to the blockchain and crypto analytics firm, exchanges have experienced a huge inflow of BTC since March 9, receiving nearly 319,000 of the cryptocurrency on March 13 alone.
However, between March 12-13, almost nine times the average daily amount of Bitcoin was sent to exchanges to be sold, causing the price to plummet to $3,000s. This represented BTC’s biggest daily drop in the last seven years.
Has the price of Bitcoin stabilized for now?
Though the volume of crypto inflow remains high — twice the daily average — according to Chainalysis, the price of BTC appears to have stabilized for the moment.
“The majority of excess bitcoin arriving at exchanges has been sold, and the worst of the oversupply appears to be finished for now.”
The firm offers some possible explanations for the price leveling out after such a tumultuous period. Though transfers between 10 and 1,000 BTC accounted for 70% of the flow of the cryptocurrency through exchanges, Chainalysis says the overall amount of BTC wasn’t enough to do lasting damage:
“The majority of available bitcoin was not cashed out, suggesting that most bitcoiners are happy to hold. At 712,000 more than average, the amount of bitcoin sent to exchanges in the last eight days is unprecedented. But this extra 712,000 represents just 5% of available bitcoin (all mined bitcoin minus all lost bitcoin).”
Future disruptions to the crypto market
With retail businesses shutting down across the United States and more companies being forced to let their employees work from home, the future of all financial markets is uncertain. International travel restrictions to combat the spread of the coronavirus continue to change on a daily basis, which has delayed or cancelled crypto events worldwide.
Despite this uncertainty, Chainalysis still plans to use traditional indicators to monitor Bitcoin:
“It’s hard to predict where the bitcoin market will go next. However, large increases in exchange inflows have proven to be a good indicator of increased volatility, so we recommend keeping an eye on the amount being transferred to exchanges. We also expect that professional traders will continue to drive events, as opposed to retail exchange users, simply because they are responsible for much larger volumes.”
