It’s been a crazy week and it’s been hard to keep up with all the FUD (fear, uncertainty and
doubt) that seems to be coming our way. There is a lot of panic in the market right now, with the Bitcoin bull and bear markets tore all sentiment apart to the extreme. Wednesday’s price retreat
was one of the biggest capitulation events in Bitcoin’s history. The correction was the biggest
bull market correction since the consolidation period between the double pumps in 2013. Bitcoin
(BTC) saw a fresh price drop on May 21 as reports emerged that China had reiterated its
commitment to crack down on mining and trading.

First, let’s talk about concerns over China. It should be noted that news of China’s mining ban has been in the media for several years. Quite simply, this latest “news” is nothing new. It is essentially the Chinese government reiterating the same ban they have imposed since 2017. Cryptocurrency payments have always been banned, but as the government is preparing to launch the eYuan CBDC, they want to make this clear again. The law has not changed in any way. Of course, the headlines addressing this issue don’t point out this nuance. As it stands, “China bans cryptocurrencies” will get more clicks than “China reaffirms cryptocurrency ban”.

However, when the news first appeared, the price of BTC was around $200. Since then, the
cryptocurrency has experienced a Chinese trading ban in 2017 and has reached an ATH of over
$64,000. let’s stay calm and not give in to the FUD.

Furthermore, it seems that many newer market participants were spooked by the recent FUD
surrounding Bitcoin and decided to sell. In the four days leading up to the sell-off, exchange
traffic turned significantly bearish, with exchanges having +59,313 BTC in just four days. for the
first time since March 2020, we saw a true capitulation during the decline. When the market capitulates, it is often an attractive time to buy at a discount.

A lot of the selling seems to be coming from young whales and we conclude that there are three reasons for this.

• The average spend output life of ASOL has trended downwards throughout the decline. In other words, the average age of the coins being sold has become younger throughout the
  decline.
• The downward trend in dormancy. This indicator describes the average number of days each
  spent coin is dormant before it is transferred. A lower dormancy period means younger coins
  are sold, which is what we have seen throughout the price decline.
• The downward trend in the cap on realisations. This is probably the best way to illustrate the capitulation that has occurred. The realised cap is the capitalisation of bitcoin based on when
  the coin was last moved. A realised cap on the decline indicates that coins that last moved at
  a higher price are now selling at a lower price. If we see a rise in the realised cap, this would
  indicate that older market participants have been making sales because their coins last
  moved at a much lower price.

The bull market is not over yet, we are just consolidating. Let’s look at these 3 key bullish indicators:

• Reserve Risk. This is a price/Hodelbank ratio. When reserve risk goes up, prices go up and
  confidence from the Hordes goes down. We are currently seeing the opposite, with prices
  falling and confidence from hordes rising. With the overheating zone not yet reached, we are
  cooling down and confidence from the Hordes is rising.
• MVRV: This is a simple ratio of realised capitalisation to market capitalisation. This metric is
  cooling off as market capitalisation has fallen over the last 2-3 months while realised market
  capitalisation has grown.
• Pure on-chain trading volumes at different price levels. At the end of a bull market, when there is a blow out top, the volume distribution is very low. In the last 2-3 months there has been a large amount of volume in the 40k-60k range, especially between 50k-50k. In total, over 25% of
  the supply has moved above 40,000. Let’s compare the current distribution to the top of 2017.