FX.co ★ Bitcoin: $20,000 - False bottom or strong support?

Bitcoin lost more than five percent on Tuesday, moving down from a ten-day consolidation range. Quotes updated the July lows, dropping below $19,000, which now opens the way for the main cryptocurrency to the lows of June.

Against this background, which is natural, critics of bitcoin have become more active, while market participants have put on the agenda the question of whether the June lows will withstand. Otherwise, it threatens a new wave of significant collapses.

"Gold bug" calls to escape from a sinking ship

An obvious bitcoin opponent and "gold bug", the founder and chairman of the SchiffGold fund, economist Peter Schiff did not fail to comment on Tuesday's fall on his Twitter.

He acknowledged that bitcoins are indeed scarce, but that doesn't matter now. The dominance of the main cryptocurrency is falling sharply, its scarcity does not help. At the same time, the price recorded the biggest drop in two months.

In his tweet, Schiff highlighted not only the continued collapse of the main cryptocurrency, but also the strong fall in BTC dominance. So far, this has fallen to 38.1%, the lowest level since the previous crypto winter in June 2018.

Schiff believes that the loss of dominance in the cryptocurrency market is due to the fact that bitcoin has to compete with almost 21,000 other cryptocurrencies. As for the altcoins that BTC is losing its dominance over, Schiff called them "inherently less valuable."

The economist also acknowledged that bitcoin is a scarce asset; however, in the current situation, this does not matter, since altcoins have a much larger supply than BTC.

Supporters of the main cryptocurrency, including Schiff's son Spencer, were quick to convince him that he was wrong. Schiff previously acknowledged that crypto "may have a future," but bitcoin won't be part of it. Influencer David Gokhshtein admitted that Schiff was right this time around in his BTC prediction.

"$20,000 is a false bottom"

On Tuesday, fund manager SchiffGold also tweeted that $20,000 is likely to prove to be a false bottom for the top cryptocurrency. He mentioned that BTC has been trading around this level for almost two weeks as the market gave naive investors a chance to jump on the bandwagon.

He recommended leaving the "sinking ship" before it was too late. Curiously, the day after this tweet, the price of bitcoin continued to fall.

Meanwhile, Mike McGlone, senior commodities strategist at Bloomberg, stated that bitcoin remains in a bull market and shared a screenshot quoting from a recent Bloomberg report. It says that BTC has joined the global store of value this year, along with gold and US Treasuries.

The report also indicated that earlier, in 2015 and 2018-19, the main cryptocurrency experienced the same deep collapses as now, and after that it soared to new historical peaks.

What does the growth of the inactive supply of BTC mean?

Amid a market correction, the inactive supply of bitcoin has grown significantly over the past few months. Glassnode's latest report shows that the BTC supply, which was last active at least 12 months ago, reached 65.77% on September 6th.

"Bitcoin supply, which has remained unspent for at least a year, has reached a new historical value of 12.589 million BTC. This is equivalent to 65.77% of the circulating supply. An increase in dormant supply is a characteristic of a BTC bear market," Glassnode on-chain analysts emphasized..

Earlier this month, crypto experts drew attention to the sharp drop in the supply of BTC on the exchange as it reached its lowest level in about four years. The total number of unprofitable bitcoin addresses also recently reached an all-time high.

Commenting on the recent drop in BTC and whale accumulation trends, Glassnode stated that the global bear market remains in place. Periods of price rush intersect with aggressive distribution by the largest classes of investors amid a search for exit liquidity. However, multi-year macro accumulation remains in place, and holders and long-term holders do not appear to be concerned about current economic conditions.

These analysts also stressed that, along with holders, short-term holders are now stress testing their statistically weakest hands. This group of investors has been the main proponent of daily acquisitions within the current price range, culminating in a large concentration of coins clustered around the current market value. The latest price move down resulted in much of the supply from short-term holders taking unrealized losses.