October 19, 2021

A respite after a strong rally - Onchain Pulse from October 9, 2021

How to understand what happened on Tuesday? And will this event have broader implications? Analyst Will Clemente analyzes the current situation in the bitcoin market, using on-chain metrics, separating signal from noise.


Dear readers, I hope the week was successful andare you OK. This week was a great start to the fourth quarter for bitcoin, which was hitting $ 56K. Let's dive into some of the key trends.

In terms of structure, prices have overcome the keythe breakout point of the level since May, which was about $ 50 thousand: while BTC is holding above this value, the bullish sentiment is relevant. In the short term, we see some resistance from these values ​​and up to $ 56– $ 58 thousand, which is not unexpected, since a significant volume of liquid supply has been observed since the beginning of this year. In addition, funding for perpetual futures has skyrocketed. It's worth keeping in mind the $ 53K mark as a logical buying area (if we get one).


At the end of last week, our good friend SOPRbounced off 1, and now we see that it goes up. SOPR compares the realized value with the value at creation, giving an indication of the state of the profits that the market is trading. For this particular chart, I am using aSOPR (filters for sub-hour exits) with a seven day moving average to filter out the weekly SOPR. We want to see continued growth (similar to October - November last year), but stabilization is at least above 1.

Adjusted SOPR version (7-day MA)

Let's take a look at our shock ratiossuggestions. The Supply shock ratio for illiquid supply continues to rise, indicating that coins are moving towards network entities with low spending dynamics, but we are seeing some coins flow from liquid to highly liquid entities, as evidenced by a high liquidity ratio. Exchange flows have not changed over the past two weeks, and have declined by about 490 BTC over this period.

Illiquid Supply: Neutral Bullish

High liquidity ratio: slightly bearish in the short term

Supply Shock Ratio for Stock Offer: Neutral

Supply Shock Ratio for highly liquid (red line), illiquid (blue) and stock (purple) supply

One of the cornerstone concepts in on-chain metricsis Coin Days Destroyed. For simplicity, let's say I buy / withdraw 1 BTC to my wallet. I decide to keep it in this wallet for 1 year, so this coin has accumulated 365 coin days. At the end of those 365 days, I send BTC to the exchange for sale, 365 coin days are now ruined. In bull markets, we see high rates of destruction as old coins are being spent on strengthening. Conversely, in bear markets, we see a decline in disruption as long-term investors accumulate cheap BTC and hold their reserves tightly for the next century-long bull market.

You can take the next step and split the CDD intovolume to get the adjusted cost of destruction. This is called Dormancy. Dormancy has declined since January, except for a sharp jump after falling from $ 30K. This means that the amount of destruction is decreasing or old coins are being spent less. The same is reflected in ASOL, SVAB and SOAB.

Average coin idle time (30-day MA)

Another methodology is Liveliness,which is the ratio of the sum of the destroyed coin-days to the sum of the ever-created coin-days. During periods of spread, liveliness increases as the number of CDDs increases relative to that created. During periods of accumulation, liveliness decreases. Liveliness has been declining for several months now, indicating that more coin days are being created than destroyed.

Note: I am using a 30-day moving average adjusted for users here.

User-adjusted liveliness (30-day MA)

Here is one of my favorite graphs:long term holder supply shock ratio. The methodology for this metric is that when LTH blocks a large enough portion of the supply, there is a supply squeeze effect in the market. The ratio has reached all-time highs, which is extremely bullish. What I'm really interested in is that when you put it in context, Glassnode uses a 155-day threshold to determine LTH, so the increase shows that some entities who bought their coins in early May (before dropping to $ 30k. ) still hold them.

Supply shock ratio of long-term holders

Another way to look at the dynamics of a proposal isthese are HODL waves. They show the amount of BTC that has not changed in each nominated time cohort. An all-time high of 85.1% of Bitcoin's supply hasn't moved for at least 3 months.

HODL waves

We are seeing some profits from the whales,shown by the green line. This is a 14-day moving average filtered across all network actors from over a thousand for all known actors that we have identified on-chain, with exchanges being the most important. It's not too surprising to see this after a lot of movement since the summer, let's continue to monitor it.

Note: General inverse correlation with stock balances (blue)

The amount of bitcoins held by whales (balance> 1000 BTC). Filtered all clusters of addresses of well-known Glassnode exchanges, funds, OTC brokers, etc.

Let's take a look at the activity of miners.We can see how the hash is returned aggressively, this is indicated by the orange line. Thanks to this, we now had 6 direct positive difficulty adjustments. Miners also started accumulating coins again a bit after selling a few weeks ago.

Miners activity

This is also reflected in the miner net position change metric, which takes into account the 30-day change in miners' balances.

Change in net position of miners

As for the activity of miners, let'slet's take a look at the Hash Ribbons indicator created by Charles Edwards. One of the most accurate macro buy signals for bitcoin, it checks 30-day and 60-day moving averages of the hash to capture the recovery of miner surrender events.

White to light red: 30D crosses below 60D

Light red to red: 30D crosses above 60D

Red to White: 30D has exceeded 60D + 10-day SMA price is above 20-day SMA price



Short term:some coins are moving from liquid to highly liquid entities of the network, exchange flows are neutral, some whales are making a profit, funding is growing, and market capitalization is increasing. I wouldn't be surprised if I see a short-term pullback to around $ 53k and at least retest that level.

Macro Look: Extremely Bullish.Supply dynamics (hodling behavior) remains strong, hash returns to the network, retail is still out of the market. I am updating my thesis regarding a strong fourth quarter.

That's all for today. Great weekend to everyone.

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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