Bitcoin 

BTC

$17,415

 could undergo one last bear market capitulation if "whales" — addresses that hold more than $1 million worth of Bitcoin — ramp up their selling pressure, according to on-chain analyst Willy Woo.

Room for another Bitcoin drop?

Woo assessed the average price at which short-term investors entered the Bitcoin market across history and charted the daily change in the value. That resulted in a cost basis, a metric that signals when "inexperienced" traders sell BTC to "experienced" traders during a BTC free fall, which typically coincides with the market bottom.

The cost basis underwent significant dips during the previous bear markets, also before strong accumulation took place, as shown in the chart below. Interestingly, Bitcoin's ongoing correction — from $69,000 in November 2021 to around $39,000 in March 2022 — has not resulted in a massive drop in its cost basis.

"It’s inconclusive whether we have capitulated yet," said Woo, adding that "there’s room for another drop" based on the cost basis signal.

Whales have been selling their BTC

Woo's outlook appeared in line with the rising speculations about Bitcoin's next big drop. For instance, Christopher Yates, the editor at AcheronInsights, said BTC's price could crash to $30,000 due to the "deteriorating macro environment."

"What makes me increasingly wary that the low is not yet in for 2022 is the fact that we are yet to see a capitulation style spike in volume that has occurred at all the recent lows in late 2019, early 2020 and mid-2021," Yates wrote in his latest BTC analysis, adding:

"Though not a prerequisite for a market bottom, such a capitulation-like spike in volume helps to give us confidence for when such a bottom may be near."

Data resource Ecoinometrics provided evidence of the demand gap between small and rich Bitcoin investors in its latest weekly report. For example, it noted that addresses that hold as much as 10 BTC have been accumulating the coins in the past 30 days.

Conversely, those that hold more than 10 BTC have been distributing them.

Woo also noted that Bitcoin whales have been selling off their stash, thus maintaining the downward pressure on price. That means small investors have been absorbing the sell-side pressure, and so far preventing Bitcoin price from dipping below $30,000.

Additionally, Ecoinometrics analyst Nick, noted that the ongoing accumulation trend is "as sluggish as it gets," adding that it could grow weaker after the Federal Reserve's expected rate hike in March to tame rising inflation. Excerpts:

"To summarize, the Fed is in control. If they mess up their tightening cycle, all risk assets will tank. Bitcoin currently trades like a risk asset, so it is unlikely to be an exception."

Ecoinometrics and Willy Woo's analysis also show that inexperienced investors have not been dumping their coins, thus becoming long-term holders (LTH) in the process. 

Bitcoin is "most deflationary" in history

Meanwhile, another metric dubbed "LTH Inflation/Deflation ratio" is also corroborating the aforementioned theory, according to ARK Invest on-chain analyst David Puell. 

In detail, Bitcoin inflation points to LTH releasing their BTC into circulation faster than the natural sell-side of miners. Conversely, deflation suggests that LTHs have absorbed a proportional amount of the miner sell-side every day alongside the outstanding total supply.

Related: Crypto vs. physical: Musk-Saylor inflation debate boils down to scarcity

The attached chart below shows the LTH Inflation/Deflation ratio showing the period of inflationary outcomes flashed in red and deflationary readings in green.

"Our analysis suggests that Bitcoin, proportional to supply held by long-term holders (LTH), is at its most deflationary in history," noted David Puell, an on-chain researcher at ARK Invest.

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