Letter no. 17: Has The Bear Arrived?
Date: 26/1/22 BTC Price: 38.1k
Hey Subscribers,
Welcome to letter no. 17 of Dor’s on-chain analysis newsletter.
In my last letter I’ve outlined that another accumulation period is likely upon us, I have mentioned too that it’ll bring about downwards price action. Since then BTC has gone down from 43k area to a low of 33k which from there it bounced back to 38k.
In this letter, I will assess whether this accumulation period is likely to transition into a bear market or whether we’re likely to form a bottom soon and start a new uptrend.
I’ll start off with the metric I’ve created which I’ve mentioned in the previous letter; Realized Price-to-Liveliness Ratio. It is showing up in Glassnode’s Weekly Report Video (11:23) you’re welcome to watch.
As I’ve mentioned in the previous letter, a break below Realized Price-to-Liveliness ratio is an early indication of a bear market beginning. A break below has happened, which might be the first signal that we might get into a period of a bear market.
If so happens, I think that a market dynamic similar to 2013 will unfold, a two macro highs market. This means that we might head down to realized price (blue level) which is currently at 24k and from there head up towards the 100k plus area.
Since the last letter, LTH supply has increased peaking at 13,400k coins but has begun to decrease a little in the last few days. We’d wanted to see a continued accumulation from LTH side, a decrease in their supply along with a price decrease would not be a good sign; meaning that the experienced and high conviction players are leaving the market because of disbelief in higher prices.
Let’s assess who is selling coins and what it tells us about market strength.
I’ll start off with LTH-SOPR, we can see that LTH are not realizing profits at a high rate, currently selling coins that have around 50% profit, probably coins that have been bought around July dip.
This means that the younger coins out of LTH supply are being sold and that old coins which hold profits of x5-x10 and are held by the very experienced long-term holders that probably still hold the belief and knowledge that higher prices will arrive later this year.
Moving on to STH, these are market participants that hold coins for less than 155 days and have a higher tendency to spend their coins. In this group, we can include short-term holders, trade, speculators & newbie market participants.
They’ve been realizing losses along with the downtrend, which means that they’re the ones that panic-selling and pushing price lower.
Continuing about STH, we can see that mainly when they reach a peak in losses it’s a signal of a possible bottom.
Currently, 16% of the circulating supply is held by STH and is in loss, relative to historical values it is very close to the area where it signals a possible bottom.
I’ll finish off with a metric of Dilution-Proof a great on-chain analyst. The metric is called Market-Value-to-Long-term-holder-Value, or in short MVLV.
The metric represents the number of standard deviations that the market value is (over) extended in comparison to the total value of LTH.
We can see that we’re very close to the 0 blue line, which historically has signaled a possible bottom.
Conclusions
Although price action in the last two weeks is not keeping many optimistic I most say that a probable period of bear market might arrive. On the other side, we’re at the edge of knowing whether BTC will bottom or continue lower.
Realized-Price-to-Liveness ratio and MVLV are signaling for a probable bottom, while STH are the main panic-sellers and LTH are holding tight on old coins & accumulating. All these are signaling that we still have hope for a possible return to a macro uptrend.
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 investment / trading advice, do your own research.
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