Introduction

Even after a significant correction and weeks of minimal activity, long-term bitcoin investors continue to hold onto their coins. According to Coin Metrics, the cryptocurrency closed at $25,972.52 on Friday, experiencing a 0.25% loss for the week. This marks the eighth negative week in the past nine. The previous week saw an 11% decline. The crypto market had been relatively inactive until a sudden sell-off on August 17, which was triggered by inflation updates and the possibility of more rate hikes.

Uncertainty in the Crypto Market

Following Federal Reserve Chair Jerome Powell’s speech in Jackson Hole, Wyoming, on Friday, uncertainty has risen in the crypto market. Investors are concerned about the potential impact of inflation data on interest rates. If rates remain high for an extended period, it could disappoint expectations of a rate decrease in the first half of 2024. Until the Federal Reserve sees sustained progress and not just a 2% inflation threshold, the market may continue to experience restrictions.

Market Sentiment and Regulatory Overhang

Despite recent market volatility and regulatory uncertainties, sentiment in the crypto market has remained relatively calm. Social media chatter analysis conducted by Indicia Labs shows that sentiment only dipped into neutral territory seven days after the price drop. This is in contrast to the significant drop in sentiment leading up to the November crash. The future direction of crypto in the U.S. remains uncertain due to regulatory concerns.

Factors Influencing the Bitcoin Correction

JPMorgan attributes the bitcoin correction partly to broader corrections in risk assets, such as equities and technology stocks. Frothy positioning in the technology sector, higher U.S. real yields, and growth concerns regarding China have also contributed to the correction. However, JPMorgan predicts limited downside for crypto markets in the near term.

Resilience of Long-Term Bitcoin Investors

Trading data reveals that long-term bitcoin investors have remained steadfast despite recent market weakness. Holders of bitcoin for a year or longer now comprise nearly 70% of bitcoin holders, according to Glassnode. Although the number of long-term holders who have held bitcoin for one to two years has decreased by 36% since the beginning of the year, those who bought between two and three years ago have increased by 85.8%. This unwavering commitment from long-term holders, combined with the upcoming reward halving in April, may contribute to higher prices in the future.

Conclusion

Despite market uncertainties and fluctuations, patient bitcoin investors continue to hold onto their coins. The recent correction and regulatory concerns have not deterred long-term holders. As the market awaits further developments and regulatory clarity, the resilience of these investors and the upcoming reward halving could potentially drive future price appreciation.

Source: Visegrad Info 24

Reporters: Michael Bloom, Nick Wells