Elon Musk Pumps Dogecoin, Bitcoin Sees Record Stability: A Data Perspective by IntoTheBlock

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This Week in Crypto: A Data Perspective (July 20-24)

Every week, IntoTheBlock brings you on-chain analysis of top news stories in the crypto space. Leveraging blockchain’s public nature, IntoTheBlock’s machine learning algorithms extract key data that provide a deeper dive into the major developments in the industry. 

This week, we have a long-take covering major news regarding Bitcoin — from the widely-covered Twitter hack to the stamp of approval of two major corporations — and the positive effects they have had on on-chain metrics. In addition, we uncover what has been occurring with blockchain data behind Dogecoin’s retail frenzy.

Bitcoin On-Chain Indicators Signal Growing Interest Despite Stagnating Price

Despite an active week in Bitcoin news, Bitcoin’s price has stayed uncharacteristically stagnant. While the price of the cryptocurrency with the highest market cap did increase around 2.58% on Monday, it just recorded its second lowest period of 30-day volatility.

Many people in the crypto space may have noticed Bitcoin’s recent lack of volatility, with Binance’s CEO Changpeng “CZ” Zhao jokingly stating that people have been comparing it to a stablecoin. As can be seen in the graph above, it is evident that Bitcoin has been more stable, with its 30-day volatility dipping below 20% (orange line in the graph above) for the second time in its history. This has been a result of Bitcoin hovering around the $9,000 level for approximately 84 days since its price surpassed this mark on April 30. 

With such stagnant volatility, one may come to believe that there have been no relevant news or updates around the coin recently. However, it may have been one of the busiest weeks in terms of major news for Bitcoin. For one, Bitcoin became a trending topic worldwide as an anonymous hacker gained access to the Twitter accounts of some of the most famous people in the world including Barack Obama, Bill Gates and Jeff Bezos, scamming users to send them Bitcoin. 

IntoTheBlock’s Twitter sentiment indicator — which uses a classification machine learning technique to identify a positive, neutral or negative connotation — identified a record of 13,558 negative tweets regarding Bitcoin on that day. The percentage of tweets represented by negative tweets was also quite high (17.85%) relative to the year-to-date average of 5.30%. 

Finally, the total number of Bitcoin mentions detected by the algorithm reached an all-time high, pointing to potentially increasing awareness. Despite this sudden spike in negative sentiment and Twitter mentions, Bitcoin’s price resumed its sideways movement.

On the other hand, Bitcoin received major stamps of approval from two global payment behemoths: PayPal and Mastercard. As covered by CoinDesk, PayPal revealed that it has been working on plans to roll out cryptocurrency buying and selling in Europe since last year. Moreover, Mastercard took steps to facilitate companies to issue their own crypto payment cards. Through a partnership with London-based start-up Wirex, Mastercard granted principal membership to the company, effectively granting it permission to directly issue cards on Mastercard’s network. Again, price did not seem to move in reaction to these announcements.

People who have been in the crypto space since 2017 or earlier may have been perplexed by Bitcoin’s lack of reaction to these news items, considering how mere rumors of institutional adoption had previously led significant rallies. 

However, while Bitcoin’s price did not break out as a result of these news stories, key on-chain indicators signal bullish behavior from Bitcoin holders. 

For instance, the total number of addresses actually holding Bitcoin reached new highs after following a sideways trend for three months. Having previously peaked at 30.48 million holders, the number of addresses holding Bitcoin is now approaching 31 million as its growth appears to have accelerated throughout the second week of July. This coincides with the major developments previously mentioned.

Additionally, the number of addresses with a holding period of less than a month reached the second highest yearly value. As demonstrated through IntoTheBlock’s Traders indicator, nearly 3 million addresses attained Bitcoin within the last 30 days.

Ultimately, these two on-chain indicators signal positive momentum amongst Bitcoin holders despite the price stagnation. While this does not guarantee Bitcoin’s price to “moon” from here, it does establish strengthening fundamentals and optimism arising from the major news throughout the last couple of weeks.

Elon Musk Propels Dogecoin Retail Frenzy

Throughout the last month, the crypto space has had an unexpected token grabbing headlines: Dogecoin. The meme-inspired cryptocurrency has found increasing support amongst retail traders. 

A few weeks ago, Dogecoin first went viral after a TikTok challenge encouraging people to buy Dogecoin “stock” (as they referred to it in the video) attempted to have DOGE reach $1. Peaking at $0.0055 a few days after the challenge, it was far from reaching the dollar mark, but still managed to increase over 140% in three days. 

More recently, the “former CEO” of Dogecoin has appeared to stage a comeback. Elon Musk, who has previously stated that Dogecoin might be his favorite cryptocurrency, tweeted the following on July 17:

It’s inevitable pic.twitter.com/eBKnQm6QyF

— Elon Musk (@elonmusk) July 18, 2020

While it’s unclear how many people seriously believed Elon Musk’s meme about Dogecoin taking over the financial system, it certainly had an impact on DOGE’s price, as it increased by 13% following the tweet. Both of these instances generated mass speculation as the number of new Dogecoin addresses surpassed 500,000 within the two weeks between the TikTok challenge and Elon Musk’s tweet.

This frenzy also meant that the number of new Dogecoin addresses created reached a yearly high of 43,120. While the increase in new addresses sparked by these viral events is significant, it is dwarfed by the number of addresses that went to zero. 

The number of addresses that transferred out all their Dogecoin reached an all time high on July 14. This is a clear indication that a large number of holders took advantage of the retail frenzy to sell their Dogecoin at higher levels. To be precise, 9.5% of the 3.05 million addresses with a balance of Dogecoin on July 13 sold their coins following the TikTok challenge. 

Ultimately, it appears that people who had been holding Doge prior to the frenzy took the opportunity to “dump” their coins. Who knows, maybe Dogecoin will keep gaining traction and viral appeal. But in general, it is still best to avoid these periods of mass hysteria.

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