As Macroeconomic Clouds Darken, Only Hardened HODLers Remain in Crypto 

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In Brief
  • Bitcoin tourists and speculators have been flushed out.

  • U.S. inflation is expected to worsen this month .

  • Increasing rates could put more pressure on high-risk assets.

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Hardened HODLers remain the only strong hands left in crypto and Bitcoin markets as all the “tourists” have been flushed out, according to Glassnode.

In its latest weekly on-chain analytics report titled The Expulsion of Bitcoin Tourists, blockchain data provider Glassnode stated that there has been a complete expulsion of ‘fair weather investors’ leaving only the HODLers remaining.

The massive crypto market flush out, which has seen more than $2 trillion leave the space since Nov, has been largely due to the liquidation of leveraged positions and speculators, and weak hands panic selling (as they did in previous bear markets).

Bitcoin prices dropped almost 38% in June, making it one of the worst months in history, only eclipsed by a monthly dump during the 2011 bear market. The second quarter was the worst for losses in 11 years.

Coins flowing into crypto wallets but no history of spending

BTC has been consolidating for the past fortnight while exchange reserves have been draining, suggesting that coins “appear to be flowing into wallets with no history of spending,” it reported before concluding:

“The Bitcoin network is approaching a state where almost all speculative entities, and market tourists, have been completely purged from the asset.”

Macroeconomic clouds darkening  

There are a number of key dates in July where macroeconomic factors come into play in the United States. Analysts are largely in agreement that this bear market has been heavily influenced by greater economic factors, such as galloping inflation and a cost of living crisis.

The Federal Reserve is on a mission to quash inflation at any cost, and this means hiking interest rates. This increases the cost of borrowing and encourages more spending and saving. It is generally bad news for risk-on assets such as crypto and tech stocks.

On July 13, the consumer price index (CPI) will be released by the U.S. Bureau of Labor Statistics. June’s inflation rate has been predicted at 8.7%, slightly higher than May. This could put a further squeeze on consumer spending and investing.

U.S. interest rates are expected to increase again later this month, which also puts more pressure on crypto markets due to higher prices and debt repayments.

Keep calm and HODL on

The biggest kicker could come on July 28 when the U.S. Bureau of Economic Analysis (BEA) publishes its GDP estimates for the second quarter. Two consecutive quarters of GDP decline spell a state of technical recession. The first quarter saw a 1.6% decline in GDP and the second quarter is expected to be just as bad with predictions of -1 to -2%.

This will be the first crypto bear market in a recession, despite the fact Bitcoin was spawned out of the 2008 global financial crisis. The diehard believers are getting ready to batten down the hatches, HODL on, and wait for that final capitulation.

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Martin has been covering the latest developments on cyber security and infotech for two decades. He has previous trading experience and has been actively covering the blockchain and crypto industry since 2017.

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