Bitcoin’s decline from $64K is equivalent to Black Thursday, but Coinbase outflows suggest accumulation.

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The current Bitcoin price correction is reminiscent of the March 2020 collapse — with one major exception.

Elon Musk and COVID-19 have something in common: they have both panicked buyers into selling their Bitcoin (BTC) shares at least once.

The parallels became stronger in the preceding six days, when Musk doubled down on his chaos-inducing approach to Bitcoin. Over the weekend, the billionaire developer engaged in a Twitter spat with top cryptocurrency supporters, including podcaster Peter McCormick, in which he promoted his prefered token, Dogecoin (DOGE), as superior to Bitcoin.

Musk almost admitted at one point that he would make Tesla sell its $1.5 billion investment in Bitcoin made in February. Meanwhile, offers for the flagship cryptocurrency continued to fall for each of Musk’s tweets. They started at $50,000, then sub-$45,000, and finally bottomed out at $42,000.

Musk later explained that Tesla’s bitcoin shares had not been sold.

However, his explanation did nothing to mitigate Bitcoin’s downside bias. When weighed from its all-time peak of nearly $65,000, the cryptocurrency gradually stretched its bearish correction to more than 35%.

That also represented one of the fastest and deepest top-to-bottom retracement movements in cryptocurrency history, with on-chain indicators indicating that its effect on market bias was as severe as the Black Thursday collapse in March 2020 in the aftermath of the coronavirus pandemic.

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Meanwhile, blockchain analytics platform Glassnode reported a decline in the profits of Bitcoin’s circulating supply via its proprietary metric.

The “BTC Percent Supply in Profit (7d MA)” showed readings near 81.122 as of London morning on Tuesday, its lowest level since October 2020. The readings were also weak during the March 2020 crash, wherein Bitcoin declined by more than 50%.

Percentage of circulating supply in profit on a 7-day average timeframe. Source: Glassnode

More on-chain metrics show similarities between the new, Musk-led Bitcoin market plunge and the one that occurred in March 2020 during the coronavirus panic.

For instance, the Bitcoin transfer volume tracker at Glassnode showed a spike in BTC inflow across all the exchanges. Its scale was comparable to the inflows seen during the March 2020 sell-off and the distribution by the PlusToken Ponzi scheme in 2019.

Bitcoin Net Transfer Volume from/to crypto exchanges. Source: Glassnode

A higher BTC inflow indicates a higher probability of traders selling those tokens for other assets, including fiat and altcoins. Conversely, a higher outflow shows traders’ willingness to hold BTC for longer periods.

Institutional versus retail sentiment

Meanwhile, Glassnode’s Bitcoin transfer volume data revealed two stark investment perspectives: retail and institutions. The analytics platform broke down its observation based on inflow/outflow data collected from two of the world’s largest cryptocurrency exchanges, Binance and Coinbase, in its weekly newsletter.

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Binance is a non-US company that mostly draws retail traders and buyers from around the world. Meanwhile, Coinbase has a better reputation among retail investors in the United States. According to Glassnode, Binance was the largest recipient of Bitcoin inflows after Musk’s market collapse.

“This provides further indication that the recent inflows are likely to be driven by both new market entrants (panic sellers) and potentially due to capital rotation into other crypto-assets,” wrote Glassnode in a weekly note.

Ki Young Ju, CEO of CryptoQuant — a South Korea-based blockchain analytics platform — also noted that most BTC inflows went to Binance, adding that it is not necessarily a bearish signal.

“I’m going to wait until the inflow signal cools off,” he added, nonetheless.

Bitcoin Net Transfer Volumes from/to Binance. Source: Glassnode

On the other hand, Coinbase has logged higher new Bitcoin outflows ever since the cryptocurrency broke above the $20,000-price milestone last year. The trend continued even in the current week, showing that institutional investors were absorbing the retail market’s selling pressure.

Bitcoin balance on all exchanges vs. Coinbase vs. Binance. Source: Bybt.com

Still bullish

In other words, rich investors purchased Bitcoin at local lows as average ones sold them under the influence of Musk.

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“Don’t listen to what they say,” said early-stage investor Anthony Pompliano in his note to clients on Monday. He added:

“Just watch what they do with their money. Elon Musk and Tesla understand that they are going to be dependent on bitcoin moving forward. It wouldn’t surprise me if they are actually buying more bitcoin now at depressed prices or at least plan to purchase more in the future.”

Pompliano went on to say that Bitcoin continues to be the best-performing macro commodity, a “apex predator” that has outperformed securities, bonds, real estate, and commodities. Twitter CEO Jack Dorsey, whose payment firm Square added Bitcoin to the balance sheet to combat inflationary concerns, also said on Friday that his team will “always work” to improve Bitcoin.

The comments came in contrast to Musk’s support for Dogecoin. Veteran investor Paul Santos wrote in his Seeking Alpha piece that the Tesla CEO might want to make money out of thin air by exploiting the so-called cryptocurrency euphoria.

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