Market X-Ray: Valentine's Day crypto massacre ends in a V-shaped reversal

Hi Frens — Cole here.

It has been a pretty wild past 24-hours, with the market facing a massive liquidation cascade yesterday that came about as Bitcoin and many top altcoins all faced capitulatory selloffs.

Honestly, this movement was a long-time in the making and has only made the market healthier. We’ve reached a point where all you need to do to make money is avoid being liquidated, but unfortunately, data shows that many traders are still relying on heavy leverage to try to magnify their profits. This has led to increased volatility in both directions.

Ah, and the obligatory shill: if you want access to the exclusive interviews with top traders and industry executives, our research about DeFi and crypto trends, and the additional DeFi letter, you will need to subscribe. But have no fear, it’s only $14.99 a month, or $139.99 a year. Get yourself a belated holiday present and subscribe to Alpha Alarm today.

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We’re going to release an exclusive interview with a leading Bitcoin on-chain analyst this upcoming week. You don’t want to miss out on this interview.

Okay, What the Hell Happened Last Night?

Sunday in the markets started off like most others, with most altcoins drafting higher while Bitcoin and Ethereum both remained steady.

Shortly after the daily close took place, chaos ensued, with BTC nuking to sub-$46,000 lows while many altcoins shed 20% or more from where they closed at 00:00 GMT.

One of the most extreme examples of this was Sushi, which plummeted into the $12 region at its lows.

Evidently, the market is still in a firm bull trend, as this dip was aggressively bought and appears to have simply been the market’s way of clearing out over-leveraged longs and resetting funding across the board.

Just as it saw one of the most extreme drops, Sushi also saw a massive rebound that allowed it to set new all-time highs within the lower-$18.00 region earlier today.

Similar rebounds were seen across the board, transforming the Valentine’s Day market massacre into a textbook V-shape recovery that may mark the start of the next leg higher for the entire market.

There are a few bits of on-chain data that are important to consider at the moment.

Miners Aren’t Selling!

As discussed in past market x-ray updates, miners were a huge source of selling pressure for Bitcoin in recent times, but this has since changed.

While miners may have been the reason why the entire market had slid from $50,000 previously, it now appears that they have all but halted selling, with outflows remaining at similar levels to those seen prior to Bitcoin’s run-up in late-2020.

This trend is clearly elucidated while looking at data from analytics platform CryptoQuant, which shows that miner outflows are currently sitting at multi-month lows.

So long as miner outflows remain this low, the market will be able to push higher with ease.

How are Whales Reacting to These Movements?

Whales seem to keen on adding exposure to Bitcoin on major selloffs like the one seen yesterday.

This is indicated by data from Whalemap, which shows that the cryptocurrency has formed a strong demand zone between $46,500 and $48,500.

It is currently sitting just above this region, which could mean that major upside is imminent.

“Quick btc update. Strong demand zone has formed between 46.5k and 48.5k. Consolidation below 46.5k could push us all the way down to Elon Musk levels.”

Combine strong support from large players with a lack of intense buying pressure, and it seems like a perfect recipe for continued upside.

The narrative surrounding corporate and institutional adoption has never been stronger either, which may contribute to any imminent Bitcoin uptrend.

About Us:

Joseph Young is a cryptocurrency analyst who has been in the space since 2014. He contributes to Forbes, CoinTelegraph, and a host of other top crypto news sites. Over his 6+ years in the space, he has built countless connections with industry leaders and has amassed over 120,000 followers on Twitter.

Nick Chong is a passionate crypto researcher who specializes in identifying and extracting conclusions from trends within the rapidly emerging DeFi-space. He has been involved in the crypto markets since 2016, and sources deals for Parafi.

Cole Petersen first learned about Bitcoin in 2013 and began working in the space in 2017. While on a gap year as a student at the University of California, Irvine, he now leads LINKPAD, a venture capital fund, and previously worked as an associate at BlockVenture.

Pepe of the Day:

Pepe the Frog has become the unofficial mascot of the crypto markets, so we feel it is only fitting to add a “Pepe of the Day” section highlighting only the finest and rarest Pepes.

Today’s featured Pepe: “I sold the dip!”