Bitcoin (BTC) is in a “terrible state” when it comes to adoption — but there is already a silver lining to the eye, new research says.

In the latest edition of its weekly newsletter, Week On-Chain, crypto-analytics firm Glassnode said that Bitcoin is going through a “major detox” phase.

Bitcoin adoption goes back to March 2020
The current BTC price action is putting pressure on everyone from long-term holders (LTHs) to miners, and it is hard to get relief.

Overall turmoil and resistance at $20,000 keeps BTC/USD at levels visited only once since 2020.

With this week’s rally above $20,000 accompanied by massive profit taking, there are still warnings that more pain is set to face the market first before a recovery occurs.

For Glassnode, persistent lows are causing a seismic shift in the Bitcoin investor profile, with hashrate and speculators – so-called short-term holders (STHs) – now pushing in.

The report summarized: “Network activity remains in tatters with network adoption levels dropping to levels last seen during the coronavirus crisis.”

One constructive note, however, is that retail participants have been kicked out of the network, leaving only the class of HODLers, professional merchants, and everyday Bitcoin users. This indicates that the user base is at its most basic level.”
A reset in the network configuration can provide a positive nuance in countering the dependence of flatlines on the chain.

As Cointelegraph reported this week, LTHs are notorious for their stubbornness during bear markets, and data shows they are not in the mood to sell.

“The HODLer category remains assertive with both mature US dollar coin wealth reaching ATH, and many lifetime metrics reset entirely to historical lows, underscoring an unwillingness to spend holding coins,” Glassnode continued, noting the latest analysis. for the data.

“This indicates that the majority of the current market volatility is related to the short-term holder category.”
‘Big supply gap’ threatens to return to $12,000
Despite the increasing prevalence of LTHs as the majority of investors, STH could produce some dramatic downsides should Bitcoin drop below the overall lows of $17,600 in June of this year.

Related: BTC Price Remains Below $19,000 Amid Hopes The Fourth Quarter Bitcoin Bear Market Will End

Glassnode explains that this is the result of a volume gap below this level – which means any sell-off could easily increase to the next supply zone, currently at $12,000.

“A large supply gap appears below $18,000 up to the $11,000 to $12,000 range,” Week On-Chain states elsewhere.

“Trading below the current cycle low would put an unusual volume of short-term holder coins at a deep unrealized loss, which could exacerbate downside reversibility, and trigger another large-scale capitulation event.”
The accompanying chart showed a lack of volume between the two price zones, which is in stark contrast to the area around $20,000, which is now full of STH interest.

Illustrative chart of the distribution of realized unspent prices adjusted by the Bitcoin entity (screenshot). Source: Glassnode
Meanwhile, macro factors mainly contributed to other warnings about BTC price stability in recent weeks and months, with forecasts including BTC/USD dropping below $10,000.

Source: CoinTelegraph