Crypto and equities markets are down and aside from the positive news of Celsius repaying all of their debt and avoiding a massive liquidation, there are few on the spot reasons that are prompting investors to buy Bitcoin and altcoins.
The collapse of numerous decentralized finance (DeFi) protocols, crypto investment funds and BTC trading 60% below its all-time high continue to weigh on sentiment but a few positive tidbits of data could be a sign that the market is ready to enter a consolidation phase.
expect people will shift from a comatose state of fear to the realization that tens of billions of $ in forced spot selling (LFG, 3AC, lenders, miners) were a capitulation/risk transfer rivaled only by the Covid crash https://t.co/vAj7HfTKxf
— light (@lightcrypto) July 7, 2022
Crypto investors HODL
According to a recent survey conducted by Appinio, despite the collapse in crypto prices and start of the bear market, “more than half (55%) of crypto investors held their investments in response to the recent crypto-asset market sell-off with just 8% selling their investments.”
This suggests that the the investment conviction of a majority of crypto investors remains strong. The study also found that “33% of American investors are invested in crypto-assets,” an “40% of investors believe Bitcoin presents the best investment opportunity over the next three months.”
American investors show resiliency
When it comes to how American investors responded to the broad pullback across financial markets, Appinio found that 65% of respondents held their investments and remain confident in their choices.
When asked to pinpoint their most pressing short-term concerns, 66% of respondents cited rising inflation, 39% highlighted the state of the global economy and 34% identified international conflict.
According to Callie Cox, U.S. investment analyst at eToro, these concerns combined with ongoing uncertainty “and an overall increase in cost of living and housing costs” have formed “a perfect storm of setbacks” for investors.
“Despite these factors, investors across generations are demonstrating a level of maturity and understanding and are not letting emotions dictate important money decisions.”
Related: Bitcoin traders expect a ‘generational bottom,’ but BTC derivatives data disagrees
Bitcoin enters oversold territory
In addition to the resiliency displayed by crypto investors, several on-chain metrics also suggest that the market may have hit oversold territory and is primed for a period of consolidation.
The MVRV Z-score, which uses a combination of Bitcoin’s market value, realized value and z-score, has been a reliable tool to help identify when BTC is “extremely over or undervalued relative to its fair value” according to LookIntoBitcoin.
Bitcoin MVRV Z-score. Source: LookIntoBitcoin
As shown on the chart above, periods where the red z-score has entered the lower green band have represented good buying opportunities for BTC, as have times when the market price dropped below the realized price, a feature shown by the blue and yellow lines at the top of the chart.
The Bitcoin Investor Tool provided by LookIntoBitcoin likewise offers insight when buying or selling Bitcoin can produce outsized returns.
Bitcoin Investor Tool. Source: LookIntoBitcoin
The green shaded areas on the chart represent periods of time where the price of Bitcoin is at a level that is considered historically low and may represent a good opportunity to buy.
It should be noted that with the Bitcoin investor tool and the MVRV Z-Score, the time spent in bear market conditions varies and can go on for an extended period, so it would be wise for investors to not solely base their investment thesis on any particular metric or indicator in isolation.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.