Bitcoin Sellers Exhausted, Accumulators HODL The Line
Bitcoin supply-side dynamics look to be as strong as ever and on-chain indicators show that bitcoin made it through a capitulation phase, but macroeconomic headwinds remain for legacy and risk assets.
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Analyzing On-Chain Bottom Indicators
In this week’s dashboard release, we highlighted some key on-chain metrics we like to track. In this article, we want to walk through more of those in detail. Across bitcoin’s short history, many on-chain cyclical indicators are currently pointing to what looks to be a classic bottom in the bitcoin price. Market extremes — potential tops and bottoms — are where these indicators have proven to be the most useful.
However, these indicators need to be considered alongside many other macroeconomic factors and readers should consider the possibility that this could be another bear market rally — as we still sit below the 200-week moving average price of around $24,600. That being said, if price can sustain above $20,000 in the short-term, the bullish metrics paint a compelling sign for more long-term accumulation here.
A major tail risk is a possible market-wide selloff in risk assets that are currently pricing a “soft landing” style scenario along with the potentially incorrect expectations of a Federal Reserve policy pivot in the second half of this year. Many economic indicators and data still point to the likelihood that we’re in the midst of a bear market similar to 2000-2002 or 2007-2008 and the worst has yet to unfold. This secular bear market is what’s different about this bitcoin cycle compared to any other in the past and what makes it that much harder to use historical bitcoin cycles after 2012 as perfect analogues for today.
All that being said, from a bitcoin-native perspective, the story is clear: Capitulation has clearly unfolded, and HODLers held the line. Let’s dive into some of our favorite bitcoin-native metrics to quantify the relationships between supply and demand.
Let’s start with a broad overview of our on-chain framework:
Given the transparent nature of bitcoin ownership, we can view various cohorts of bitcoin holders with extreme clarity. In this case, we are viewing the realized price for the average bitcoin holder as well as the same metric for both long-term holders (LTH) and short-term holders (STH).
Read Glassnode’s Quantifying Short-Term and Long-Term Holder Bitcoin Supply
The realized price, STH realized price and LTH realized price can give us an understanding of where various cohorts of the market are in profit or underwater.
With the resurgence past $23,000, bitcoin is looking to break above the cost basis of all three cohorts. This is significant because of the collective psychology effects when most market participants are no longer underwater.
The rest of this article is open to paying members only. Here’s what’s behind the paywall 🔏:
In-depth analysis of long-term and short-term holder metrics. 🔍
Reading HODL Waves and their effect on bitcoin price. 💎
Key takeaways for bitcoin’s supply-side dynamics. 🔑
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