New highs thanks to the launch of ETF BITO - On-chain pulse from October 26, 2021

Bitcoin climbed to new all-time highs onthis week following the launch of the ProShares Bitcoin Strategy ETF (ticker: $BITO).  The BITO ETF topped $1.1 billion in assets under management in its first two days of trading, surpassing the 18-year record set by the $GLD Gold ETF.

Since BITO ETFs are based on bitcoin futures traded on the CME exchange, in this review, Glassnode analysts will analyze the explosive growth in open interest and trading volume on the CME.

Bitcoin Futures Backed ETF Launch

The top news in the industry last week waslaunch of the BITO ETF product based on futures contracts traded on CME. Open interest in CME contracts rose sharply in October, increasing by $ 3.95 billion (265%). This set a new all-time high of $ 5.44 billion for open positions in futures on the CME.

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Trading volume also reached a new high in$ 7.66 billion on October 20. Traders have boosted CME futures trading volume by $ 490 million from the previous high set in February 2021.

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Funding rates in futures markets forperpetual swaps also hit a new local high on the same day as prices hit $ 66K. This signaled that many traders were taking long leveraged positions in the midst of the rally and ETF launch. As is often the case in times of abundance and high leverage, prices have corrected quickly, eliminating excess leverage, hitting stop-losses and pushing funding rates back to lower levels.

Please note that funding ratesremain at the same level as before the beginning of September. While open interest in futures remains close to all-time highs, the risk of further declines in order to obtain more leverage remains relevant.

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Finally, in derivatives markets and moreIn a constructive light, the share of futures margin backed by volatile cryptoassets continues to decline. Crypto-margined futures contracts fell from 70.1% in April to 44.6% today.

The inverse of this observation is thatthe provision of stablelocks or fiat is currently 55.4% of open positions in futures (against 29.9% in April). This is a much healthier state of leverage in a market where collateral price volatility is gradually decreasing in favor of stablecoins and fiat currencies.

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Old coins in motion

Last week we reviewed the earliestsigns of older coins, reflecting more experienced long term holders (LTH) who sell coins and make a profit. This is a typical behavior when new price highs are reached, and after one more week of observing price movements, we can assess the state of this trend.

Over the past two weeks, the offer of long-termholders decreased by about 39.5 thousand BTC. However, when viewed in context, it follows a period of accumulation and growth, with supply held by long-term holders up 2.42M BTC from lows in March.

Current supply held by LTH at 680KBTC is higher than it was at this time last year, and even after several weeks of sell-off, it is starting to return to gains. This observation suggests that perhaps the distribution of LTH so far has been more of an “event” than a trend.

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We can see the magnitude of the lifespandestroyed by old coins moving in the Dormancy metric (coin downtime). Dormancy represents the average number of coin days destroyed (lifespan) per BTC unit spent on that day. The general interpretation is as follows:

• higher valuesindicate a higher average age and usually indicate a proliferation of older coins (typical of bull markets);
• lower valuesmean that the average age of coins is relatively young and typical of bear markets and periods of accumulation.

During 2019-2020, a baseline was establishedthe level of the Dormancy pre-bull market and it is around 50 days. This gives us a benchmark for what constitutes accumulation versus distribution. Incredibly, the accumulation from May to September manifests itself as extremely low Dormancy values, dropping below 25 days in mid-September (strong signal of accumulation). This indicator has increased slightly over the past two weeks, but continues to hover around the 50-day baseline pre-bull level, suggesting long-term coin spending is modest rather than extreme.

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A similar picture can be observed in the metricBinary Coin-days Destroyed that begins to grow. This again is very similar to the behavior seen in previous bull markets, where long-term holders begin to spread around new highs. A similar picture is observed from October 2020 to January 2021 during the Bitcoin rally from $ 10K to $ 42K.

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HODL waves adjusted for realizedcapitalization (Realized Cap HODL waves) confirms the above observations, as the younger bands (warmer colors) saw a slight increase. As the old coins are spent, the larger realized value of the coins moves into these younger stripes, and the old stripes will decrease proportionally.

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SOPR for short-term holders alsosignaled a return to confidence with a return back to 1.0. The SOPR reflects the cumulative return on coins spent that day, with values ​​greater than 1.0 indicating net income and less than 1.0 indicating net losses.

Short-term owners are usuallyby margin buyers and sellers, and the SOPR for short-term holders often signals support (in a bull market) and resistance (in a bearish) when it returns to 1.0. This indicates that both winning and losing coins remain dormant and signifies a return of confidence. In a bull market, a decline in the SOPR offers a reasonable option for spotting lows in a correction, even if it is a short-term bounce.

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Overall, several long-term holders have startedspend your coins to make a profit and show increased values ​​for the destroyed lifespan metrics. However, Dormancy and Binary CDD gains remain fairly small compared to previous bull cycle allocations, and short-term holders stopped spending during this correction. With long-term holder supply already beginning to recover, the most likely interpretation is that the vast majority of coin holders are still expecting higher prices.

Glassnode analyst community charts

In addition, we are pleased to present to your attention several charts from our community of analysts, created using Glassnode tools.

Let's start with the Top cap model (modeltop capitalization), which was developed by the grandfather of on-chain analyst @woonomic. This model applies a multiple of 35 to the all-time average bitcoin price to create a top cycle model in which all four previous highs in the macro market have been selected.

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The next tool is Illiquid supply shockratio (illiquid supply shock ratio), ISS as suggested by @Wclementeiii. Where coins are primarily derived from liquid circulation, the ISS ratio will tend to rise, suggesting an increased likelihood of a supply shock. Conversely, a decline in the ISS ratio will occur as illiquid coins are returned to liquid circulation, reducing the likelihood of a supply shock.

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Realized price-to-liveliness ratiorealized price to liveliness), RPLR, was introduced by @dorinvesting. Modifies the realized price using liveliness. By taking the relationship between the two, a fair value model for bitcoin can be established that takes into account periods of time when hodling or selling dominate investor behavior.

• Where more happenshodling, more coin days are created, liveness tends to zero, and the fair value of RPLR is estimated higher.
• In times of lesserhodling is destroyed more coin days, liveness tends to unity, and the fair value of RPLR becomes lower.

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Finally, Bitcoin price temperature(bitcoin price temperature) created by @dilutionproof and used to create an average reversal model based on bitcoin investment cyclical and halving cycles. It provides both an oscillator and price ranges for assessing which price levels match fair value or exceed multiples of standard deviations.

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That's all!

BitNews disclaim responsibility for anyinvestment recommendations that may be contained in this article. All the opinions expressed express exclusively the personal opinions of the author and the 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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