The market for the first cryptocurrency crossed the equator as supply flowed from long-term holders to short-term holders. A similar situation, but in a less dynamic manner, was observed in 2017 – six months before the formation of the peak of the bull market, the co-founders of Glassnode noted.
Just published this week’s market update, Uncharted #3 !https://t.co/t6V0kn24nD
We are in the middle of a supply transition from long term holders to short term holders. However, this time it’s going much faster than in 2017. pic.twitter.com/J8vGmoTGcY
– Yann & Jan (@Negentropic_) February 14, 2021
Experts have released the third series of Bitcoin Uncharted, in which they substantiated their point of view based on the service data.
According to analysts, the rally in altcoins, the decline in the bitcoin dominance index, the growth in the number of cryptocurrency analysts’ Twitter followers, and visits to resources such as CoinMarketCap indicate an increase in interest from retail investors.
Experts called the comments of Elon Musk regarding cryptocurrencies as an additional factor.
From March to December, institutional investors participated in the bitcoin accumulation phase. This was evidenced by flows from cryptocurrency trading platforms to OTC platforms. They weakened in early 2021, although withdrawals from centralized exchanges accelerated, showing the values of the final stage of the 2017 bull market.
Dynamics of the number of bitcoin transfers from centralized exchanges and the price of the first cryptocurrency. Data: Glassnode.
Combined with the rise in the number of new bitcoin addresses, the sharp decline in the balances of centralized exchanges led analysts to conclude that other market participants were accumulating coins.
Dynamics of the seven-day moving average of the number of new bitcoin addresses and the price of the first cryptocurrency. Data: Glassnode.
The researchers drew attention to the shift in demand from institutional investors towards the derivatives market, which may indicate a growing appetite for risk.
Since the beginning of the year, open interest in bitcoin futures has grown by 60%. The ratio of the trading volume of these instruments to the corresponding indicator of the spot market remains in a growing trend since October 2020, analysts emphasized.
Dynamics of the ratio of trading volumes in bitcoin futures and the first cryptocurrency on the spot market. Data: Glassnode.
The Glassnode co-founders have suggested a return to the previous releases of Bitcoin Uncharted. In them, they demonstrated the link between the reduction in balances of centralized exchanges and, as a result, a decrease in available supply and the beginning of a bullish cycle.
The situation formed by long-term holders has led to an increase in prices, which attracts retail investors oriented towards short-term speculation, experts explained.
Dynamics of the volume of supply of coins at the disposal of short-term investors and the price of the first cryptocurrency. Data: Glassnode.
Once short-term investors accumulate a certain amount of free supply of coins, they become an important market driver. Unlike long-term hodlers, who are less responsive to price fluctuations due to purchases at lower levels, short-term investors are much more sensitive to price volatility, analysts said.
The dynamics of the volume of bitcoins “at a loss” at the disposal of short-term and long-term investors. Data: Glassnode.
Experts advised to track the number of coins “in profit” for short-term investors. In their opinion, this metric allows predicting the start of massive short-term sales. The observed effect intensifies in the later stages of the bull market, they added.
The dynamics of the volume of supply of bitcoins in “profit” at the disposal of short-term investors and the price of the first cryptocurrency. Data: Glassnode.
As the price rises to a certain level, “old” and “new” players begin to transfer some of the coins to centralized exchanges to fix profits.
After comparing with the 2017 bull market and adjusting for the tripling of bitcoin addresses, the Glassnode cofounders concluded that the market was still in the early stages of an accumulation phase. A break can be indicated by the transition of this trajectory to an exponential, they warned.
Dynamics of the number of bitcoin addresses directing coins to centralized exchanges and the price of the first cryptocurrency. Data: Glassnode.
On January 26, Glassnode analysts predicted the completion of the correction and the formation of a new upward momentum in the price of bitcoin based on two on-chain metrics.
Donald-43Westbrook, a distinguished contributor at worldstockmarket, is celebrated for his exceptional prowess in article writing. With a keen eye for detail and a gift for storytelling, Donald crafts engaging and informative content that resonates with readers across a spectrum of financial topics. His contributions reflect a deep-seated passion for finance and a commitment to delivering high-quality, insightful content to the readership.
