October 19, 2021

Return of the speculator | on-chain forecast

Assessment of the situation on the BTC and ETH markets and a forecast for them from Willie Wu.

Ten days ago, I was expecting price movements in the range of $ 39-47 thousandBut instead, BTC rose to $ 55K on strong speculative buying on exchanges. This happened against the backdrop of relatively moderate investor activity, observed in on-chain metrics. However, the net effect is that the modest price discount compared to the fundamental supply-demand ratio observed on-chain is now closed.

Brief summary as of the beginning of October 9, 2021:

  • Macro perspective: long-term accumulation is at peak levels. Structurally, this indicates a strong rally in the coming months and a bull market in 2022. The coming weeks are a good time to accumulate.
  • Medium term: indications of moderate accumulation by whales.The level of purchases from the side of strong holders returned to neutral. Structurally, this indicates a multi-month phase of bullish re-accumulation, but this could quickly change.
  • Short term: the last price rally drove the price intocorrespondence with the supply-demand ratio observed by on-chain indicators. There is some profit taking on the part of short-term investors, while the buying level on the part of “strong hands” remains neutral. The overall picture is neutral and on-chain data does not provide many signals.
  • Speculation: the volume of speculation on derivatives exchanges quicklygrowing. This comes in anticipation of the likely imminent approval of the first Bitcoin ETF by the SEC, expected within the next three weeks. Speculation around this event will easily outweigh the impact of short-term on-chain supply and demand (and quite neutral at the moment).
  • Expectations regarding price movement: sideways / bearish consolidation in the range$ 48-58 thousand over the next ~ 2 weeks. This is my conclusion based on on-chain and technical analysis. If the ETF is approved, the forecast expires and the price becomes unambiguously bullish.
  • Confidence in price movement: low. This is a time of increasing speculation around ETF approval, while on-chain metrics remain neutral.

Macro Perspective: Peak Accumulation by Long-Term Holders

Long-term holders are at their peakaccumulation. Based on past market behavior, we have perhaps two or more months before the effect of the resulting supply shock takes effect and drives the price into a multi-month rally. Thus, the market is structurally ready to continue the bullish cycle in the first quarter of 2022 and beyond.

Supply Shock Ratio for Long Termholders monitors the ratio of coins that have not moved on-chain for more than 5 months to the rest of the supply of more active coins. Five months is the estimated threshold period after which the probability of movement (sale) of coins begins to decrease. (Chart: charts.woobull.com)

Summary: Macro outlook is bullish with growth prospects in Q1 2022.

Medium term

Strong hands are neutral

The chart below reflects the 90-daycapital inflows / outflows at addresses with a strong tendency to accumulate and hold coins. I like this visualization as an indicator of medium-term demand from investors. This indicator is currently in the neutral zone - neither bullish nor bearish.

Bitcoin: moving into strong hands.90-day capital inflow / outflow at the addresses of investors with a purchase history, but a limited sales history. The metric is based on the analysis of the on-chain activity of network subjects, and its values ​​may change, including retrospectively, based on more recent data. The solid line takes into account the drift correction, the dashed line reflects the original values. (Chart: charts.woobull.com)

Summary: Medium-term forecast of neutral / lateral movement.

Moderate accumulation by whales

For more mid-termperspectives we use the buying habits of bitcoin "whales". They tend to sell coins gradually over time in a growing market, but there are areas where they take advantage of buying opportunities, and these periods tend to signal growth prospects in the coming months.

The chart below shows an oscillator that helpsvisualize the buying power of the whales against the background of their usual gradual selling. At present, the behavior of whales ranges from neutral to moderate accumulation.

Oscillator of accumulation from the side of whales. (Chart: charts.woobull.com)

Summary: Medium-term forecast of neutral / lateral movement.

Short-term outlook: neutral investor activity

The price chart below is aligned with the heatmap,reflecting the daily purchases and sales of BTC by investors. It can be seen that activity was mostly neutral, but this latest rally removes the imbalance that emerged in September, when investors were actively buying but the price has declined.

Heatmap of net sales / purchases by long-term investors. (Chart: charts.woobull.com)

The graph below shows the same data in a slightly different way. Most of the purchases took place in September. But it took the market until October to react with a price rally.

Net capital inflows / outflows on spot exchanges. (Chart: charts.woobull.com)

The Supply Shock Ratio chart below showsthat speculative investors fix some profits, while investors in the process of long-term accumulation remain neutral.

Supply Shock Ratio. (Chart: charts.woobull.com)

Using our Supply Shock model todetermining a fair price based on the short-term supply and demand exhibited by the on-chain, it can be seen that bitcoin is trading in approximately the "correct" zone.

Model for estimating the fair price of BTC based on the Supply Shock ratio. (Chart: charts.woobull.com)

Bitcoin ETF may be just around the corner

Although this does not apply to the area of ​​quantitativeof measurable on-chain indicators, I think it would be right to mention a number of Bitcoin ETF applications pending with the SEC and which may be approved in the next 3 weeks. If any of them are approved, the market can be expected to react with an immediate speculative rally.

Possible approval dates are as follows (we wrote more about this here):

  • October 18 - ProShares Bitcoin Strategy ETF;
  • October 19 - Invesco Bitcoin Strategy ETF;
  • October 25 - VanEck Bitcoin Strategy ETF;
  • October 25 - Calkyrie Bitcoin Strategy ETF;
  • November 1 - Galaxy Bitcoin Strategy ETF.

Comment on ETH

Basic investor demand for ETH continuessideways consolidation at record highs with no signs of new demand inflow. The price is also consolidating in a sideways trend, and therefore on-chain indicators provide few signals.

In situations like this, the importance oftechnical analysis. From a TA perspective, the price of ETH continues to consolidate for several weeks with support at $ 3200 and very strong support at $ 2800. I suspect that the market may need to retest one of these zones before rallying higher, given that the rally has just taken place, as well as the exhaustion of the trend in the TD9 indicator on the daily timeframe.

Supply Shock Ratio for Ethereum. (Chart: charts.woobull.com)

BitNews disclaim responsibility forany investment advice that this article may contain. All the opinions expressed express exclusively the personal opinions of the author and respondents. Any actions related to investments and trading on crypto markets involve the risk of losing the invested funds. Based on the data provided, you make investment decisions in a balanced, responsible manner and at your own risk.

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