The Daily Dive #144 - Market Momentum Flips Bullish
On-Chain Delta Gradient
In today’s Daily Dive, we’re highlighting the Market Realized Gradient metric coined by Glassnode’s lead on-chain analyst, Checkmate. The metric looks to capture the current state of market momentum comparing price to capital inflows.
Here we are highlighting the 28-day Delta Gradient which looks at the difference between price over the last 28 days relative to the difference in realized price over the last 28 days with statistical normalization applied. This measures the momentum change in speculative value (price) versus true organic capital inflows (realized price). On interpreting the Delta Gradient from Glassnode:
When the Delta Gradient is positive it indicates an expected uptrend is in play which can be expected to last a similar length of time to the period of the oscillator considered (i.e. 28-day Delta Gradient, suggests a 1-2 month uptrend is in play).
When the Delta Gradient is negative it signals the converse, that a downtrend is in play with similar expected duration.
As the bitcoin price and market cap move faster than realized price and realized cap, we can look for times when there’s a possible trend reversal in price that realized price has yet to catch up to.
As a refresher, the realized price of bitcoin is the average price of every coin on the network the last time it has moved, with a current reading of $24,069.
What we saw over the last two days is that the 28-day Delta Gradient flipped positive indicating upside to the market over the next month and that a potential market low is in, short-term. This shows that on-chain inflows have yet to catch up to the latest macro price reversal.
The 140-day Delta Gradient provides a better long-term view when trend reversals play out. We’ve yet to see the 140-day metric turn positive, but it is rising towards zero.
What we’re also seeing is some acceleration in the 30-day percentage change in realized price over the last week. Although still slightly declining, realized price growth bottomed at the end of January.
A rising realized price indicates higher capital inflows into the network, raising bitcoin’s “floor” price. In the below chart, bullish periods are defined when the 30-day growth of realized price exceeds 10%, neutral periods are growth in between 0-10% and bearish periods are growth below 0%. We look to be headed back to a neutral market state if capital inflows continue.
The flip in a momentum shown by the 28-day Delta Gradient comes with bitcoin 33% of the lows, and with a realized on-chain losses flipping to realized on-chain gains following the short squeeze above $40,000.
Over the last week realized market capitalization has grown on average by $512 million per day after realized losses (coins acquired at the top being sold for a loss) for the entirety of January.
... and then it flips bearish. lol. that's bitcoin!