Later in the day on December 31, Bitcoin and the larger cryptocurrency market moved negatively, wiping out intraday gains and ending a very successful year on a downbeat note.
According to statistics from Cointelegraph Markets Pro and TradingView, the price of bitcoin dropped below $46,000 on December 31 and has since been holding around that level. At $45,933, the leading cryptocurrency is down nearly 5% from its intraday high and down 2.9% on the day.
According to CoinGecko, the total market cap of cryptocurrencies dropped from an intraday high of $2.4 trillion to a low of $2.27 trillion, a loss of almost $100 billion.
As early as December 31, Bitcoin and other cryptocurrencies had a small relief bounce that quickly went away. A December options expiry event worth around $6 billion may have contributed to the price of bitcoin rising by over $1,500 in less than an hour, as reported by Cointelegraph.
The year-to-date return for Bitcoin is expected to be less than 60%, which is far lower than what many or even most forecasters predicted at the beginning of 2021. Bitcoin’s (BTC) market cap has never even come close to six figures, but the top cryptocurrency still manages to draw in investors with a low time preference. To put it another way, those who have a low time preference as investors are more concerned with their financial security in the distant future than in the here and now.
So-called “crypto tourists” who bought BTC during the summer are largely responsible for the currency’s latest price drop. A recent article from Cointelegraph said that even in December, long-time bitcoin owners were selling off amounts of bitcoin that were historically low. On the other hand, it looks like the number of transactions done on Coinbase at the end of the year went up a lot.
This week, Dylan LeClair, an analyst at UTXO Management, said, “The true OGs are hanging tight.” He was referring to the fact that long-term Bitcoin investors have a much lower on-chain cost base than those who are selling right now. Long-term Bitcoin holders have an average on-chain cost base of $17,825 compared to the present spending population’s $33,890.
In 2021, the cryptocurrency market got a lot of sophisticated institutional investors on top of the long-term hodlers who had been there since the beginning. Over two-thirds of the $9.3 billion that went into crypto funds in 2021 came from Bitcoin, according to data from CoinShares. As of December 13th, these funds had received new money for the sixteenth week in a row.