March 29, 2024

Onchain Pulse | May 11, 2021

The consolidation of the Bitcoin price continues against the backdrop of accumulation by miners and the outflow of BTC from over-the-counter platforms.Meanwhile, ETH becomes the beneficiary of the capital rotation, setting new price highs.

BTC price continued to slow over the past weekclimbing, from a low of $53,333 to an intraday high of $59,454. The price is still consolidating in the near trillion-dollar market cap range established since early February - apparently the market is still getting used to the new number of zeros in the capitalization.

On-chain signals continue to signalstrong demand for hodling from both miners and long-term owners, and overall BTC spending remains bullish. However, there are also signs of a capital flow from Bitcoin to other assets, and Ethereum is seen as the main beneficiary in this regard.

Chart executed in TradingView

Bitcoin Climbs Higher

After falling below market capitalization level$1 trillion (~$53,475) during the latest correction, the market pushed the BTC price back above an important on-chain support level. This can be seen in the UTXO Realized Price Distribution, or URPD, a metric that shows the amount of supply transmitted across different price zones.

These can be thought of as price levels, atof which BTC changed hands, creating a new cost basis for buyers and profit and loss realization levels for sellers. The price zone above the $1 trillion cap threshold is the most significant on-chain support after $11k and the market is currently at the top of that range.

BTC supply equivalent to 12.1% of coinsin circulation (2.93 million BTC), now forms on-chain support below the current market price. A much smaller volume of BTC - 0.678 million coins, 3.63% of supply - has moved above the current price and could potentially form resistance.

UTXO Realized Price Distribution (URPD).Link to updated source

Offer held by miners and OTC operators

Miners in April - May largelyreturned to the accumulation of coins: the net change in the balance of miners returned to the green zone again. The metric is calculated based on the net change in miners' balances during a sliding 30-day window.

To date, it shows that minersnot only accumulate more BTC earned on average, but also do it at an increasing pace, which indicates a strong confidence in the continuation of the bullish trend.

Change in miners' net position.Link to updated source

By zooming out and applying to the described metric14-day moving average (equal to the period of the network difficulty adjustment), you can see that the current rate of accumulation of BTC by miners is actually at a historically significant level. The current numbers are comparable to only three episodes in the past five years.

Accumulation at a rate of 6000 BTC/month.(no less than immediately after the halving) suggests that miners are holding back about 22% of the block subsidies for the same period for hodling (900 BTC/day x 30 days = 27 thousand BTC/month).

Change in miners' net position (14-day moving average).Link to updated source

Since the miners when selling the mined coinsoften work closely with over-the-counter (OTC) platforms, using the trends observed in their data, you can try to assess the balance of incoming demand from large buyers.

The total balance held by the three OTC platforms istracked by Glassnode has continued to decline throughout 2021, reaching local lows of just ₿6K last week, suggesting that demand from large buyers on these OTC platforms is outpacing supply. In addition, this trend clearly began back in December last year, when miners actively distributed the mined coins. This is consistent with the strong rise in institutional interest in asset investments at the macro level.

BTC balance on OTC platforms.Link to updated source

Hodling with a hint of capital rotation

Current on-chain consolidation rangefeatured has a lot in common with the 2020 market, which was also largely a period of accumulation. The Binary Coin Days Destroyed (Binary CDD) metric (7-day moving average) shows the trend and dynamics of spending old coins, which indirectly allows you to judge what the smart money is doing.

The last ~ 12 months can be summarized as follows:

  • June – October 2020: Sideways trend in Binary CDDindicates that the old coins were mostly motionless and accumulation was in full swing.
  • October – December 2020: uptrend in Binary CDDindicates an increase in the rate of spending of old coins in order to take profits after a breakout above $20 thousand.
  • January-March 2021: downtrend in Binary CDDindicates a return of confidence to the market as consumption of old coins declines.
  • March-May 2021: Sideways trend in Binary CDD againindicating that old coins remain relatively dormant and the market has returned to hodling and re-accumulation mode.

That being said, it should be noted that Binary CDD is trading at a higher level than in mid-2020, signaling a comparatively higher rate of old coin spending.

Binary Coin Days Destroyed (168-hour moving average).Link to updated source

The metric for the number of long-term held or lost coins paints a similar picture, but speaks more about the current period. On her diagram you can see:

  • clear growth in savings and balances in mid - late 2020;
  • high spending at the end of 2020;
  • a slowdown in spending at the beginning of 2021.

These observations are consistent with the above observations about Binary CDD.

However, in the current period (from March 2021 totoday), the number of coins in hodling is in a sideways trend (and not in an upward trend, which would be expected for a period of accumulation), with short-term bursts of spending. While this confirms that older BTCs are mostly dormant and speaks of bullish confidence in the market, the ongoing accumulation today is offset by slightly higher distribution levels.

The number of long-term coins held or lost.Link to updated source

The dynamics of the BTC balance on the two largest exchanges, Coinbase and Binance, clearly hints at where this spent BTC is headed.

  • Coinbase's balance sheet continues to decline steadily, indicating continued institutional interest in the US.
  • Binance's balance has continued to increase since early 2021, and since early April has grown faster than Coinbase's balance is depleting.

Considering Binance is the most popularplatform among retail speculators and has some of the most liquid altcoin markets, it is highly likely that recent bitcoin spending patterns are evidence of capital rotation as traders seek to take advantage of altcoin volatility while the price of BTC is in consolidation.

Exchange address balances (Coinbase and Binance).Link to updated source

Beneficiary: Ethereum

It's pretty obvious that the main destinationA significant portion of this rotating capital is ETH (and DOGE), with its extraordinary price performance in the last three weeks. To clearly demonstrate this effect, you can plot the spending dynamics of relatively old (6 months - 3 years) Bitcoin UTXOs and compare it with the ETH price chart.

Although this is only an empirical observation(correlation <> causation), the clear increase in the return of these “old” BTC into circulation after a long holding period is a compelling argument. The price of ETH during this time almost doubled from $2.2 thousand to $4 thousand.

Age of BTC outputs spent and ETH price.Link to updated source

The chart below shows the relative magnitude of this capital rotation by age group, with a noticeable spike in BTC spending in mid-May amid the consolidation of the bitcoin price.

Outputs spent by age group.Link to updated source

The level of on-chain activity in Ethereum is significanthas risen in recent weeks, which means that on-chain economic flows are supporting this price rally. The Ethereum blockchain has seen strong growth in many metrics, including the total number of smart contract calls, uniswap transactions, total transaction speed, and the dollar value of ETH transactions, to be a non-exhaustive list.

Ethereum metrics.Link to updated source

Finally, Ethereum reached another record highmaximum in the daily volume of on-chain transactions, since increasing the gas limit ensures an increase in the blockchain throughput in relation to the number of transactions. Last week saw a daily record of 1.63 million transactions, up 22.5% from the previous peak set just before the macro peak of the 2017 bull cycle.

Number of transactions in Ethereum.Link to updated source

 

The article does not contain investment recommendations,all the opinions expressed express exclusively the personal opinions of the author and the respondents. Any activity related to investing and trading in the markets carries risks. Make your own decisions responsibly and independently.

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