Letter no. 11: No straight line uptrend
Date: 17/11/2021 BTC’s Price: 59.8k
Hey Subscribers,
Welcome to letter no. 11 of Dor’s On-chain Analysis Newsletter.
In my last letter I have touched a few different on-chain categories; on-chain activity, supply dynamics, the derivatives markets & macro sentiment. I did outlined a bullish months ahead that will bring new highs. Since then, bitcoin have reached a new ATH of around 69k and at the time of writing is visiting the 59k-60k levels.
Key Takeaways
To keep an eye on SOPR developments.
Leverage is continuing to provide a healthier ground for spot-dominated uptrend.
Both LTH & STH MVRV are giving macro bullish outlook.
The amount of young coins is increasing, signaling profit taking of LTH and an upcoming macro uptrend.
Analysis Breakdown
I’ll start off this letter with our good friend, SOPR. Looking at it’s adjusted version which ignores outputs with lifespan of less than 1h.
It has not yet visited level 1, which is the breakeven point. We’d want to see the metric staying above level 1, and bouncing off it. This will mean that market participants are not willing to realize losses (aSOPR below 1), due to expectation of higher prices.
Let’s take look at another variation of SOPR, which is takes into account only spent outputs younger than 155 days. Simply put it’s short-term holders SOPR.
According to the metric STH are the ones who realized losses in the last downtrend, we’re looking to see the metric breaking back above level 1 and keeps bouncing off it after corrections. This pattern is signaling an uptrend.
Funding rates continued to trend down to lower levels, indicating that excess leverage is leaving the market. Once again, this is a positive indication which allows for healthier spot-driven uptrend.
Moreover, Crypto-Margined Futures Open Interest is in a slight downtrend. Reminding that it’s positive, because with crypto-margined when price declines so does the margin, leaving the contract less collateralized and more susceptible to getting liquidated. So, the less crypto-margined positions we have the better.
A comparison between LTH-MVRV values at March-April to nowadays gives us a positive macro outlook, the metric currently has much healthier values at the same prices.
Continuing with a look at STH-MVRV, with bands signaling peaks (sell areas) & bottoms (buy areas). The metric is currently in mid-range and trading upwards; which means we still have room to go and we’re likely to continue higher which comes along with higher prices. Another macro bullish indication in our favor.
I’ll close this letter looking at spending behavior, starting off with a metric called Spent Volume Age Bands, which is a separation of the on-chain transfer volume based on coins’ lifespan.
Turning on only LTH cohorts we can see clearly that there have been some profit taking which is healthy and typical to uptrends which was followed by return to low levels that suggests coins staying dormant & HODL sentiment.
A metric that can give us a different angle to the same picture is Realized Cap HODL Waves, we can see an increase in young coins that is indicative of old coins (which held by LTH) are being spent therefore their coin-days are reseting and they’re becoming young again.
Conclusions
As we all know, a trend doesn’t go up in a straight line. On-chain data still remains intact. All the typical and expected market behavior of early bull-market are happening; old coins gradually become young again due to LTH profit taking, spending is still at minimal levels meaning higher prices are ahead which will incentivize LTH to sell in an accelerated pace, and macro outlook suggesting still months of uptrend ahead. Still, I remain bullish for the coming months, and in my opinion we will break the traditional 4-year cycle. Keep in mind, downtrends are part of the market, they will come and go along with all-time-highs, keep a long-term view. We are still far from a bear market.
Links and References
Newsletter Archives: Dor’s On-chain Newsletter
Data Sources: Glassnode (T3 paid subscription)
Disclaimer
Nothing written in this newsletter is to be considered as an investment / trading advice, do your own research.
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