Bitcoin Price Dips Below $47K: Is This Just Another Dip or a Sign of a Bear Market?

Hold on to your hats, crypto enthusiasts! The Bitcoin rollercoaster took another dip this week, plunging below the $47,000 mark on Monday, December 13th. If you’re watching the charts, you’ll see Bitcoin currently trading around $47,198 as we speak, trying to claw its way back up. Its market cap is still a hefty $890 billion, but this price drop has definitely got some people wondering, ‘What’s going on?’

Bitcoin Supply on Exchanges Hits 31-Month Low – What Does It Mean?

Here’s a fascinating twist in the tale: even as the Bitcoin price stumbles, the amount of BTC sitting on exchanges is actually shrinking! According to Santiment, a leading on-chain data provider, Bitcoin supply on exchanges has plummeted to a 31-month low. Let’s break down why this is interesting:

• Reduced Selling Pressure: Fewer Bitcoins on exchanges can mean less immediate selling pressure. Think of it like this – if fewer people are putting their Bitcoin up for sale on exchanges, there’s less chance of a massive sell-off driving the price down further.
• Long-Term Holding Sentiment: It could suggest that Bitcoin holders are choosing to move their coins off exchanges, possibly into personal wallets for longer-term holding. This is often seen as a bullish sign, indicating confidence in Bitcoin’s future value.
• Supply Shock Potential: Lower exchange supply could potentially lead to a supply shock if demand suddenly increases. With fewer coins readily available for purchase on exchanges, a surge in buying could push prices up significantly.

Santiment themselves highlighted this in a recent update:

“Bitcoin’s supply on exchanges hasn’t been this low in 31 months, according to @santimentfeed data. Prices have been volatile as of late, but the lack of $BTC moving to exchanges right now is a positive sign that major selloff risk should be limited.”

Is This Dip Like the May 2021 Crash? Or Something Different?

Naturally, a price correction of nearly 40% from Bitcoin’s all-time high of $69,000 has sparked comparisons to the dramatic market crash we saw in May 2021. Are we heading into another prolonged bear market? Many investors are asking this very question.

However, crypto market analyst Will Clemente points out a crucial difference between then and now. Let’s dive into his on-chain perspective:

Strong Hands Buying the Dip – A Bullish Signal?

According to Clemente’s analysis, the key difference lies in who’s doing the selling and buying during this correction.

• May 2021 Correction: Weak Hands Selling: In May, even experienced, so-called ‘strong hands’ in the market started selling off their Bitcoin, contributing to the downward spiral. This indicated a broader loss of confidence and increased fear in the market.
• Current Correction: Strong Hands Buying: Now, Clemente suggests we’re seeing the opposite. ‘Strong hands’ – those with a long-term conviction in Bitcoin and often larger holdings – are actually buying Bitcoin from ‘weak hands’ who are panicking and selling in response to the price drop.

He succinctly summarized this on Twitter:

“From an on-chain perspective, here’s the key difference between now and May:

In May: Previously strong hands became weak hands

Now: Strong hands buying from weak hands”

From an on-chain perspective, here's the key difference between now and May:

In May: Previously strong hands became weak hands

Now: Strong hands buying from weak hands pic.twitter.com/6WzB1diwvc

— Will Clemente (@WClementeIII) December 14, 2021

This is often interpreted as a bullish signal in the crypto market. Why? Because it suggests that those with a deeper understanding of Bitcoin’s potential and a longer investment horizon see this price dip as a buying opportunity. They are accumulating Bitcoin at lower prices, potentially setting the stage for a future price rebound.

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The Bottom Line: Dip or Bear Market? It’s Complicated.

So, is this Bitcoin price dip just a temporary setback, a chance to ‘buy the dip,’ or the beginning of a deeper bear market? The truth is, no one can predict the future with certainty in the volatile crypto world.

However, the on-chain data points towards a more nuanced picture than just a simple crash. The decreasing Bitcoin supply on exchanges and the indication of strong hands accumulating Bitcoin during this dip suggest that there’s underlying strength and long-term conviction in the market.

While short-term price volatility is inherent in crypto, these factors could be interpreted as positive signs for Bitcoin’s future. As always, do your own research, understand your risk tolerance, and never invest more than you can afford to lose. The crypto journey is rarely a straight line upwards, but for those with a long-term vision, dips like these can present interesting opportunities.