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Bitcoin small investors buy despite the bear market: what is the course doing?

 


On-chain data shows that bitcoin adoption continues, with retail investors playing an increasingly important role.


More and more small investors are buying Bitcoin. You are investing even though we have been in a bear market for a few months. What could this mean for the Bitcoin course ? Will retail investors keep BTC price up?

On-chain data shows that the Bitcoin ecosystem continues to grow. Twitter user @OnChainCollege posted a chart on Twitter showing that the total number of BTC addresses recently surpassed 1 billion.



A larger proportion of these Bitcoin addresses are addresses with holdings of less than 1 BTC, according to on-chain analytics firm Glassnode. Calculated in US dollars, there are BTCs worth less than 24,000 US dollars (calculated at the current Bitcoin price) in the associated wallets. These addresses can therefore definitely be described as “small investor addresses”.

The number of retail BTC addresses has surged since the beginning of the year and recently hit a new all-time high. Most recently, this number reached its last all-time high during the 2018 bull run, when the Bitcoin price formed the high of the market cycle at the time (around $20,000).


In the past, the number of retail investor addresses followed the Bitcoin course. On the chart you can see that even the previous price peaks of the previous market cycles match the number of BTC addresses almost perfectly. However, this trend changed after 2018. Thus, some retail investors took advantage of the 2020 Covid crash to buy Bitcoin .


In addition, retail investors have been increasingly investing in BTC in recent months. And this despite the fact that the Bitcoin price has fallen by more than 70% since the last all-time high in November 2021. So the behavior of retail investors has changed in recent years.


One could theoretically assume that the Bitcoin price could continue to rise together with the number of addresses of investors. However, historical data shows that BTC price appears to move regardless of retail investor strategy. Is there still a connection between the trades of small investors and the BTC price?


The Bitcoin price and leveraged positions

Cryptoquant recently published an open interest chart on Twitter. The open interest is the sum of the leveraged positions (such as futures or options) on all non-institutional crypto exchanges.


On the chart you can see that the open interest has always peaked when the Bitcoin price also peaked. So there seems to be a correlation between the leveraged positions of retail investors trading on regular crypto exchanges and the BTC price. However, this does not provide any conclusions about the number of addresses and the course.


Cryptoquant explained:


“There has been a massive pullback since January 2021, when open interest rose very sharply in a short period of time.”


One of the reasons for the correlation could be heavily over-leveraged positions by retail investors. The analytics firm wrote on Twitter that "heavily leveraged pumps are unsustainable for the long term."


Recently, both the Bitcoin price and the open interest rose sharply again. So it could be that the BTC price together with the open interest will soon reach the next high point or has already reached it and further sales will follow.


Disclaimer

All information contained on our website has been researched to the best of our knowledge and belief. The journalistic contributions are for general information purposes only. Any action taken by the reader based on the information found on our website is entirely at their own risk.

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