Situation Assessment
Hey guys!
Since the last letter Bitcoin has been through a rollercoaster, price moving between 48.8k - 47.2k with a massive sell-off seeing a candle of almost 10k down to the low forties and then trended back up to the 47k area.
In this letter I would like to do a situation assessment and conclude what is bitcoin’s current condition, where we’re heading and what has changed if at all during the last week and a half.
Leverage and Derivatives
As we already know, the last sell-off was caused by leverage being wiped out of the market, 260 million dollars in long futures have been liquidated.
This kind of event is positive for a healthier uptrend; price movement will be spot orders based which are investors and HODLers who are the ones which determine the path for the long-term.
Moving forward, let’s see if any of the on-chain fundamental data have changed.
Long-term investors continuing to HODL
Looking at bitcoin long-term SOPR family, we can see that their profit taking is minimal, at levels we have not seen since October - November 2020 which was the start of the bull run.
This can give us an indication of the HODL sentiment of long-term investors, which is completely bullish.
Moreover, 30-day bitcoin HODLer net position change gives us another indication of HODLing sentiment. Coins are being matured at rates we haven’t seen since May 2020.
Looking at Spent Volume Age Bands, long-term HODLers are spending at a very minimal rates, which gives another indication of willingness to HODL due to expectation of an uptrend.
Lastly, bitcoin parametric long-term circulating supply in profit shows that long-term supply in profit is increasing.
This means that long-term HODLers are not willing to sell their coins for higher prices as an exit liquidity, therefore their supply in profit is increasing.
Moreover, we can see that everytime this metric reached an all-time-high it signaled an upcoming macro uptrend. Currently we’re at 0.65 percent of long-term circulating supply is profit while last all-time-high was at 0.69, which means we are likely to hit this percentage or go above it, when it happens it will signal an upcoming macro uptrend.
Exchange outflows suggests HODL sentiment
Before closing, a short glance at exchanges condition. We’re seeing an accelerating rate of coins moving off exchanges, this comes along with the last sell-off.
Investors are probably taking advantage of this quick pull back to accumulate more coins and move them off exchanges into cold storage for long term HODL.
Moreover, exchange balances are reaching three year all-time-low, this can show us the strong willingness of investors to HODL. This supply stored out of exchanges is surely having a positive effect on supply shortage which is and will affect price to the upside.
Conclusions
Leverage wiped out of the market, long-term HODLers willing to continue HODL and most likely taking advantage of the last sell off to accumulate more coins. Exchange outflows accelerating and balance reaching a low haven’t seen in three years.
These all are positive and healthy on-chain signals. Despite the last sell-off, on-chain fundamentals strengthened.
In the coming weeks if these metrics continue their bullish path along with more on-chain data signaling positivity I would expect the end of the re-accumulation phase which will bring in the future the second bullish run up which will probably run into 2022.