Crypto prices are enjoying a strong relief rally in March. But, how and why?
After a rocky start to the year, March may have finally put crypto markets back on an upward trajectory. In February, news of the war between Russia and Ukraine created significant opportunities for traders to re-enter the market at reduced prices. This however did not last long.
The market quickly began to rally and traders hoping to see Bitcoin (BTC) fall below $40,000 once again were left on the sidelines.
Whales stay cautious
On March 28, Bitcoin climbed back above $48,000 after nearly three months of consolidation. But surprisingly, major stakeholders with 100-10,000 BTC held in their wallets continued to quietly take profits.
The whales dumped 178,150 BTC over the course of five months, which equates to $8.39 billion at current price levels.
Yet, shark and whale Tether (USDT) holders also dumped $816.4 million into Tether in just three weeks, further heightening the concern. A bullish scenario would typically require these high level traders to hold more USDT as it implies more buying power.
Dormant investments on the move
One of Santiment’s main metrics confirming that a flat or bearish market can end is the average age invested in dollars, and it measures the average age of investments in Bitcoin.
In short, a flattening or bearish period indicates that previously inactive tokens have moved and reveal a greater likelihood of long-term upward price movement.
A prolonged period of reduction can be seen for the first time in 2022, outside of a few one-day lows in BTC’s Mean Dollar Invested Age line. In most cases, this narrowing of the line usually foreshadows a good long-term outlook for an asset’s price.
Market woes declined in March
But what drove prices up in March so quickly? For starters, the subject of war, COVID-19 cases and rising inflation are discussed less in crypto forums, indicating that the community may believe that these market tensions have already passed their worst times. .
Large Bitcoin Transactions Appear
Whales become active when prices have followed a sustained upward or downward trend. When markets are flatter, there is less activity. As March brought great returns right and left, it was only a matter of time before the whales moved. The number of transactions exceeding a value of $100,000 or more reached 3,266 separate transactions just before March 28.
Unsurprisingly, this major spike on March 28 and the day before signaled whales taking profits, which preceded a price correction for Bitcoin and the rest of the markets and foreshadowed where traders could and should optimally take profits.
Profit trades jumped as whale trades soared
Santiment has a separate metric known as the profit to loss ratio of trades, which weights profitability against the number of trades. A higher ratio indicates that more trades are generating a profit, which could eventually signal a top if the ratio gets too high and vice versa. Bitcoin and Ether (ETH) both saw the largest spikes in four months on March 28, meaning both coins had more than three times the amount of trades made while the coins were in profit, compared to the loss.
Is the market ready to shift gears?
Eventually, crypto traders were correct as there was a correction down to $44,000. However, Santiment has seen a continued trend of negative comments outpacing positive comments across multiple social media platforms. Typically, when the crowd believes prices are going to fall, prices may actually rebound. And, vice versa, prices tend to drop when the crowd gets too euphoric and excited.
March was filled with negative sentiment and has remained so since news of conflict in Eastern Europe broke the last week of February. Now that a mid-sized price retracement has occurred, which was rare in March, markets should go into speculation mode to see if this is a moment to buy on the downside.
Cointelegraph’s Market Insights newsletter shares our knowledge of the fundamentals that are moving the digital asset market. This analysis was prepared by leading analytics provider Santiment, a market intelligence platform that provides on-chain, social media and development insights on over 2,000 cryptocurrencies.
Santiment develops hundreds of tools, strategies, and indicators to help users better understand cryptocurrency market behavior and identify data-driven investment opportunities.