The Importance of Accurate On-Chain Data

Bitcoin market manipulation still exists:

The importance of on-chain analytics and blockchain data providers is rising in importance right alongside bitcoin’s price and overall adoption. However, with this increase of importance comes an increase of responsibility. Tens of thousands of traders now use popular on-chain data providers such as Glassnode, CryptoQuant and Coinmetrics. These traders are making instant reactions/decisions based on this data, trying to gain an edge over others. This incentive structure to be the first to act on the data creates a dangerous precedent for the influence of bad data on the market. These actions based on bad data can have serious outcomes for bitcoin’s price. Let’s take a look at a recent example from just two weeks ago.

On March 14, 2021, an alert was sent out to over 28,000 traders subscribed to CryptoQuant’s telegram alert service saying $1 billion of bitcoin was transferred onto Gemini’s exchange, presumably to be sold. Within a minute, this immediately triggered a sell-off from traders, ultimately leading to a cascade of long liquidations totaling 14,396 BTC, or roughly $850,000,000. This was ultimately the catalyst for a massive drop in price and the several day consolidation that followed.

Image via Glassnode

Image via Glassnode

It turned out that the transfer was actually Blockfi transferring bitcoin into Gemini’s custody solution service, making the transaction actually bullish. This is a classic example of how misinformation can be the catalyst for a market dump. When funding levels go up and traders become increasingly bullish, more leverage naturally moves into the market.

You can think of this like a game of Jenga where you’re stacking pieces higher without a strong foundation. As the Jenga tower is built higher, it takes increasingly less of a push to collapse the entire thing. This is the same way leverage works in the bitcoin market. The more bullish speculative traders become, the more leverage is in the market, ultimately making it more fragile. A catalyst such as the bad data CryptoQuant put out is all that’s needed to initiate a cascade of liquidations. As one trader hits their stop loss, they have to sell (or liquidate) which pushes the price even further down, causing the next trader to hit their stop loss. This is what I am referring to as a “cascade of liquidations.”

I strongly encourage data providers to be warier of the information they are putting out, as, at the end of the day, they are manually labeling these wallet addresses. One mistake can cause the loss of massive sums of money. With this being said, I encourage traders to look at multiple data providers to get the most accurate picture of what’s going on in the market. Hopefully, as we move closer to hyperbitcoinization, new data providers will come about. This is ultimately bullish for the ecosystem and a net positive for traders, as information confirmed across 10 data providers is much more likely to be accurate than reported by just one. I also encourage the data providers that do exist currently to be more cautious and hesitant to put out information publicly without being absolutely sure that the data is accurate. Although a great deal of respect is due to these providers and the value that they are bringing to the space, we must keep them in check to get the most accurate information possible. After all, the mantra of Bitcoin is don’t trust; verify, and billions are on the line here.

This is a guest post by William Clemente III. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.


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Global Financial Services Firm BTIG Bullish on Bitcoin and MicroStrategy – Here Are the Price Targets

BTIG managing director and digital assets analyst Mark Palmer is revealing his bullish price targets for Bitcoin (BTC) and MicroStrategy (MSTR).

In a research note, Palmer highlights the relationship between the price of MSTR and Bitcoin’s value.


“We fully acknowledge that MSTR, which last August became the first publicly traded US company to adopt Bitcoin as a treasury reserve asset, has taken a massive unhedged long position on a highly volatile speculative asset… [MSTR aims to] capture upside arising from the increased adoption of the cryptocurrency by institutional investors concerned about mounting inflationary pressures.”

Palmer’s comments on the correlation between the two assets come as he unveils a “Buy” rating for MSTR with a price target of $850 assuming that Bitcoin will surge to $95,000 by the end of 2022. MSTR is trading at around $703 with BTC valued at $59,626 at time of writing.

MicroStrategy leads all publicly listed companies in terms of Bitcoin investments to the tune of 91,326 BTC worth $2.2 billion. The company’s multi-billion dollar purchase has paid off as its BTC stack is now valued at $5.4 billion.

Palmer adds that he views Bitcoin as “digital gold” that may capture investor interest amid loose global monetary policies.

“[Bitcoin is] an attractive, non-sovereign store of value at a time when unprecedented levels of global fiscal and monetary stimulus have heightened investors’ concerns about monetary inflation and the debasement of fiat currencies.”

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Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any loses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.

Featured Image: Shutterstock/diegographyx


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NFTs ‘ten times better’ than traditional art, says Beeple’s $69M NFT buyer

Nonfungible tokens are “ten times better than their physical counterparts”, according to digital art collector MetaKovan.

The pseudonymous art patron, who was recently revealed to be blockchain entrepreneur Vingaresh Sundaresan, bought the NFT of Beeple’s “EVERYDAYS: THE FIRST 5000 DAYS” for $69 million dollars earlier this year.

Explaining the motives behind his purchase in an exclusive interview with Cointelegraph, MetaKovan pointed out that NFTs have a number of advantages over traditional artworks: they are easy to transfer, they don’t have any storage costs, and their ownership can be shared. Also, they can democratize the art world by making it more easily accessible to digital artists all over the world, regardless of their nationality and social background.

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MetaKovan even said that NFTs will bring crypto into the mainstream. 

“A lot of people are going to get introduced to crypto by NFTs”, he explained. 

The art patron dismissed concerns about the potential risks of a speculative bubble growing in the NFT market. He thinks the frenzy around NFTs serves the purpose of accelerating adoption.

“If there is speculation, that’s ok, because we are making everything fast”, he said.

According to MetaKovan,  the NFT market will eventually influence the price of large cryptocurrencies such as Bitcoin and Ethereum.

That could happen “in a year or so, when a lot more people will be using NFTs”, MetaKovan said.

Check out the full interview on our Youtube channel and don’t forget to subscribe!