Willy Woo, an economist and on-chain analyst explained why Bitcoin has been able to withstand the deleveraging. Long-term holders aren’t “giving up” their BTC but are instead trading in significant liquidity and leverage.
Woo claims that long-term Bitcoin owners act as sponges, absorbing the current selling pressure and allowing the market to move relatively quickly. The main factor that prevents Bitcoin from plummeting to critical levels is the conviction of long-term holders to buy and hold more Bitcoin.
Many long-term owners on a chain make it more resilient than assets with mostly short-term and mid-term holders. They tend to sell their holdings when volatility spikes, increasing the risks and pushing the asset’s value down.
Woo reports that the traders’ group mentioned above is expanding its portfolios mainly on the spot market. This explains why there is little interest in Bitcoin-based derivatives such as options or futures.
The general deleveraging of assets has historically led to dramatic price performance. This causes an asset’s spot market to plummet as trading platforms sell real BTC after the “paper Bitcoin is dead” is over.
Despite Bitcoin’s decline in value throughout 2022, deleveraging continues to be a part of the industry. The main reason is the global trend towards derisking among large retail and institutional investors.
The above mentioned traders helped Bitcoin get through the market phase and gain some value. According to technical analysis, Bitcoin has gained more than 9% in the past 14 days and has not yet reached its maximum value.