Crypto Valley Live (ID: cryptovalley)

Crypto Valley Live (ID: cryptovalley)

This week, the bitcoin market has seen less volatility as it consolidates between a price high of $52,420 and a low of $46,561. Impressively, despite weakness in both equities and precious metals markets, this Bitcoin consolidation has held the $45k support level identified by Willy Woo in last week’s newsletter.

Stronger U.S. 10-year Treasury yields continued to rattle markets, with yields rebounding 10.7% to end the week at a 52-week high of 1.566%. Stocks were weak in response, with the S&P 500 and Nasdaq 100 down 5% and 8% on the day, respectively, while gold fell to a 38-week low of $1,730.

Juxtaposing Bitcoin with these macro assets, the resilience of its price action is remarkable given the implications of such a rapid revaluation of Treasury yields.

Chain support"value"Last week Willy Woo pointed out that around $45,000 there is a large amount of BTC being traded on-chain, forming an on-chain support level. To wrap up the week, @n3ocortex highlighted that this support level has actually strengthened above $46,600, with 1.2 million BTC (6.5% of circulating supply) traded in this area.

value

entry point. Keep in mind that while on-chain support has gradually strengthened since last week, it will act as a level of equally strong resistance if the price breaks below it.

image description

An important question we have to ask is whether this on-chain volume is related to hoarding or is it instead sellers eager to exit. In the first step, we can observe that the BTC balance of the exchange continues to go down uninterruptedly, and another 35,200 BTC were withdrawn this week.

image description

Exchange rate balance real-time graph

secondary title

Miners are extremely bullish participants in the Bitcoin network, but they have made huge CAPEX (capital expenditure) and OPEX (operating cost) investments in ASIC hardware and facilities. That is, they remain sellers of BTC to cover ongoing capital and operating costs."other"Note that the miners shown below are only those we have identified (shown to give a good visualization of the trend). There is also a large number of unknown miners (

Miner Balances Live Chart

other

The change in miner position indicator takes into account all balances of all newly minted coins, thus providing us with a global view of the mining landscape. What we observed was a spike in selling behavior throughout January (17k to 24k BTC/day), which can largely be blamed on some larger unknown miners (and even some early miners from 2010!) .

Miner Net Position Change Live Chart

However, throughout February, we can see that the selling speed of miners is decreasing, and now, the bulls and bears are neutral. Even miners seem to be reverting to neutral or hoarding mode, even though newly minted coins make up only a small fraction of daily transaction volume (i.e. miners sell a small fraction).

image description

secondary title

long-term position holders"Long-term holders (LTH) are classified as those who hold coins older than 155 days, or withdraw to cold wallets."The Supply Adjusted Coin Days Destroyed (CDD) metric is good at tracking this LTH behavior. The longer a bitcoin is dormant, the more

coin days

more and more. As more old coins are spent and more coin days are burned, the CDD indicator will trend upwards.

Supply-adjusted CDD real-time graph

To add further weight to this argument, we can look at the net balance of these LTHs. We saw an almost identical pattern with miners, with a peak sell-off from late 2020 to early January 2021, followed by a sharp slowdown. On a net basis, LTHs are still distributed at a rate of about 44,500 BTC per day, however this accounts for less than 5% of the daily trading volume in the futures market and the trend is to reduce payouts.

image description

Real-time graph of net position changes

secondary title

The case for short-term holders

First, we review the relative supply held by STH wallets that are in profit (these shorter-held coins ended up moving at cheaper prices, green) and wallets that are now in a loss (red). During the rally to the current ATH of $58,300, there are over 5.12 million STH holdings of BTC in profit.

When this correction sold to a low of $43,300, more than 1.14 million of these BTCs turned into losses, and another 1,200 BTCs were bought (and then fell into losses) at the beginning of the correction.

This shows that about 112,000 coins have been transferred from LTH to STH in the past two weeks, and above $45,000, STH has accumulated 1.25 million BTC (this is also consistent with @n3ocortex tweet and our article in this article The URPD at the beginning of the article is consistent).

• SOPR >image description

• Real-time graph of STH profit and loss supply

• We can add weight to these break-even dynamics by looking at the STHs' spend-to-output margins. This indicator looks at how much profit all UTXOs classified as STH realized in the sell-off of the day.

1.0 means the day is profitable

Last week, we saw the SOPR reset below 1.0, which we theorize is the first indicator of investor losses at the new retail level. This week we saw SOPR-STH pull back above 1.0 despite price sideways.

STH SOPR Live Chart

This second SOPR reset is healthy as it represents STH's belief in bargain hunting. Previous retests of the SOPR after a break below 1.0 have generally signaled a halt to downside corrections, and in this bull cycle, upward price momentum has followed.

image description

secondary title

• Weekly Bitcoin Market Wrap-up

• The on-chain analysis above is a typical workflow we use to assess the sentiment and behavior of different network participants under a set of behavioral assumptions. To maximize the value of on-chain insights, a confluence between multiple metrics must be sought to increase our accuracy and probability of being correct.

• This week, we have:

• Despite macro market volatility and weakness in traditional markets, Bitcoin remains sideways above strong on-chain support (held last week).

The on-chain support of $45k has actually strengthened the turnover of more than 1.2 million BTC, and even raised the bottom line of support to the range of $46.6k to $47k.

Long-term holders have slowed their sell-off following a sell-off that began in 2021. Many of our longevity metrics such as CDD and ASOL have decreased significantly (meaning less old coins moved), and the velocity of LTH balance dumps has also decreased.

Short-term holders (assuming new investors/speculators) took losses last week and bought limit-down, and this week their belief in limit-down buying was tested. More coins moving from LTH to STH yet we don't see another SOPR below 1.0, suggesting we don't get more panic selling.

secondary title

Weekly Feature: Changes in Litecoin Positions

This week we will apply a similar analysis to Litecoin, focusing specifically on Litecoin holders. First, we assess whether old Litecoin coins are being spent or held by looking at the supply-adjusted Coin Days to Destroy (CDD). We can see that since October 2020, there has been a relatively obvious trend, CDD is on the rise, indicating that old coins are being reborn and circulating in the market.

Litecoin supply adjusted CDD real chart

The Litecoin Hold or Lost metric provides a view into the overall supply of Litecoin that is considered dormant, lost. Around October 2020, this metric peaked, with over 20M Litecoins fitting this classification (approximately 30% of circulating supply). This is similar to the peak reached in 2016, although at that time the 20M coins represented a larger share of the circulating supply (40-45%).

image description

Litecoin dormant and lost coins real-time chart