Bitcoin (BTC) was a stone’s throw away from the all-time high (ATH) price of $64.8K during intraday trading because it was hovering around $62,202, according to CoinMarketCap.
The benchmark cryptocurrency has experienced a significant upward momentum, which enabled it to breach the psychological price of $60K last week. This milestone was last seen in April.
Therefore, the value stored in the Bitcoin network is at a record high based on the realized price. On-chain analyst Will Clemente explained:
“Realized price continues to reach new highs, now over $22,000. This means the amount of value stored in the Bitcoin network is at an all-time high. Realized cap/price is the capitalization of BTC based on the last time a coin moved. (ex: 10 BTC last moved at $1 adds $10 to RC).”
Bitcoin has been experiencing an uptick in activities. For instance, large BTC transactions worth more than $100,000 have dominated the ecosystem, suggesting that institutional-sized investments and whale activities have increased.
Furthermore, Bitcoin has outperformed commodities so far this year.
“Historically, when Bitcoin entity-adjusted dormancy flow reached 1M, it anticipated that BTC was approaching a market top. BTC entity-adjusted dormancy flow is at 483K with a lot of room to go up before the next market top.”
Based on this analysis, there is more room for Bitcoin to grow. Therefore, if BTC is able to breach the ATH level of $64.8K, the price might continue to surge.
Meanwhile, Bitcoin’s open interest is experiencing exponential growth. On-chain metrics provider Glassnode acknowledged:
“Bitcoin options volume and open interest have exploded higher over the month of October. Open interest is up an incredible +107% ($6.3B) since the September lows.”
Whether Bitcoin will set a new ATH price soon remains to be seen.
After weeks of Bitcoin (BTC) sell-offs, high-net worth individuals, or whales, are finally back to buying.
Their buying activity did not only pick up when the BTC price broke out of the two-months ascending triangle to new all-time highs, but also stayed intact since the price crash on April 18.
Whales have come back to accumulate Bitcoin
Their continuous buying activity comes at a time when addresses holding more than 1,000 Bitcoin reached their 4-month support line.
Bitcoin: Number of Addresses with Balance >= 1k. Source: Glassnode
This is probably not a coincidence as the turnaround takes place at a time when profit-taking in the market is close to its support line too.
Current profit-taking behavior has followed a 7-month trend
The level at which profit-taking takes place can be derived from the adjusted Spent Output Profit Ratio (aSOPR), which measures the ratio between the price sold and the price paid for a coin while disregarding temporary coin movements (movements within less than 1 hour).
In other words, aSOPR measures by how much holders were sitting in profit (in USD) by the time they sold their coins.
Since September 2020, profit-taking has kept finding positive support at higher levels. This suggests that whenever sell-offs happened in the past seven months, sellers were comfortable not selling at a higher profit level each time, compared to the previous sell-offs. However, this trend might eventually come to an end.
Profit-taking activity suggests the market is at a pivotal moment
When zooming out and looking at profit-taking behavior in all prior bull markets, it becomes apparent that this is not only a one-time or a short-term trend but rather a longer-term pattern in Bitcoin bull markets.
These support lines tend to hold for 3-18 months. The chart below shows that a break of the second support line in each bull market historically confirmed that the bull market top was in.
Not only is the aSOPR close to breaking the 7-month support, but there is also one major difference in the latest pattern of this metric that could be a cause of concern.
Usually, the short-term tops of the aSOPR come in at higher levels each time as price increases further and rising confidence leads people to hold on to higher profits after each sell-off.
However, in the latest pattern, profits have been realized earlier in every sell-off wave for the last three months (see red arrow), a pattern usually common after a bull market top was already in.
Short-term sellers are in the driver’s seat
The latest pattern could be explained by a slower price increase in recent months and a higher number of short-term holders realizing profits. This assumption is confirmed by looking at HODL Waves, which visualize the time Bitcoins are held on to.
The redder the color, the shorter the holding period. It becomes visible that it is short-term holders who have held Bitcoin for between one week and three months have been primarily selling into the market as of late.
Bitcoin: HODL Waves. Source: Glassnode
When looking at the profit-taking behavior of short-term holders (STH-SOPR) only, one could infer that this cohort of traders might almost be done selling. The latest dip below the value of 1 shows that short-term holders even started realizing losses.
In a bull market run-up, this is usually where a bottom in price could be expected as selling activity tends to decrease significantly.
Bitcoin: Short Term Holder SOPR (24h Moving Average). Source: twitter.com/glassnode
However, as bull market tops are not formed by a lack of sellers but rather by a lack of buyers, it is highly important to also look at the trend of the current demand side.
Current on-chain volume activity suggests that the capital inflow trend is still intact. A high number of coins are still changing hands, suggesting that buying activity is still ongoing. The realized price, which expresses this buying activity by valuing all Bitcoins based on when they last moved on a daily basis, gives a good idea of how much capital moved in and out of Bitcoin.
Bitcoin: Realized Price. Source: Glassnode
A steep curve suggests high on-chain transaction volumes. If it is followed by a flat trend, it usually indicates the beginning of the bear market as not enough buyers are coming into the market willing to pay higher prices anymore. As long as this steep curve does not flatten, there should be no concern about a dwindling number of buyers.
Although this evidence suggests that the bull market top is likely not in yet, there is also no clear confirmation that sellers are done selling just yet.
A break of the aSOPR 10-day moving average support line could be confirmed in the next few days. This may signal a trend shift in sellers’ behavior from bullish to bearish. Therefore, a negative short- to mid-term scenario should be considered if this occurs.
Support levels in a bearish case
There are two major price support levels to look out for. The first one is around $51,325, which could be a strong defense zonea support level where whales most recently acquired a high volume of Bitcoin.
The second price support level is the NVT (Network Value to Transactions Ratio) price, which is currently at $47,679 and is a major price support level in Bitcoin bull markets.
If the market price was to fall significantly below the NVT price without a quick recovery within a few days, a detailed analysis of the demand side would be needed to judge if the market’s bullish structure has broken.
Market at a critical level, strong support between $47K–$51K
The supply-side suggests that sellers are currently in the driver’s seat, even selling Bitcoin at a loss in the past few days. However, their selling activity is expected to significantly reduce over the next few days if current behavior stays in line with prior bull market sell-offs.
If that is not the case, the breakdown of the aSOPR 7-month support line is likely and could signal a trend shift from bullish to bearish selling. Further downside should be expected with next major support in the range of $47,000-$51,000.
On the demand side, the capital flow still looks healthy. Enough volume is still willing to pay current prices, while whales ramped up their buying again. Current price action is still above NVT price, which suggests that current price fluctuations are still within the expected bullish territory.
Nevertheless, the demand side should be watched closely for a potential dry-up in on-chain volume over the next few days if price comes close to the NTV price.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Nothing here should be considered investment or trading advice. Past performance is not a guarantee of future results. Every investment and trading move involves risk. The author owns Bitcoin. You should conduct your own research when making a decision and/or consult with a financial advisor.
On April 14, the price of Ether (ETH) just hit an all-time high at $2,400 and although the price has increased more than three-fold since the beginning of this year, the current speculative premium suggests, there is a lot of room for upside.
Ether’s speculative premium is far from overheated
While the current price of Ether is at around $2,375, the Realized Price, meaning the average price paid by all investors who are currently holding Ether is at $802. This means that current buyers of Ether are willing to pay 2.99x the price of what all current holders have paid on average for their Ether. While this might sound high, this multiple went as high as 6 in the last bull market.
Ethereum: Market Value to Realized Value (MVRV). Source: Glassnode
In order to derive at this multiple, the Market Value of Ether (current Ether price) is divided by the Realized Value (what all current holders paid on average for their Ether). In short, this multiple is called the MVRV ratio and was invented by David Puell and Murad Mahmudov. It could also be described as the multiple of the market’s cost basis for an asset.
In the past, the MVRV ratio served as a good signal for when the mania got out of hand, meaning when the multiple reached a value above 4, and where a value below 1 proved to be a good buying opportunity.
The MVRV ratio could rise to 5 by end of May
The following chart shows the multiple over the course of Ether’s existence. It becomes visible that it has followed an upwards trend channel since December 2019.
Ether Market Value to Realized Value (MVRV). Source: Glassnode
If this trend were to continue, and a similar MVRV ratio run-up like in the past is ahead of us and eventually a multiple of 5 could be reached by end of May. Based on the current Realized Price of $802, this would suggest a market price of Ether of $4,010 and would be a price increase of 71%.
Even better, as more buyers are coming into the market, the Realized Price is expected to rise over time. Over the past month alone, it increased by 15.1%. Projecting this to the end of May, the Realized Price could rise by 26.43% to around $1,014 per Ether. Based on a multiple of 5, this would result in a market price of $5,070 per Ether, which is an increase of 116%.
Ethereum: Realized Price. Source: Glassnode
Fasten your seatbelt
This projection is a real possibility, especially with Ether and Bitcoin breaking to new all-time highs on a regular basis. There are no guarantees when it comes to price and time targets. However, there are probabilities, and according to this on-chain indicator, the upside scenario has a much better chance to play out.
$5,000 for one Ether by end of May might sound crazy now, but $2.4k also sounded crazy a year ago when Ether closed the day at $159.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Nothing here should be considered investment or trading advice. Past performance is not a guarantee of future results. Every investment and trading move involves risk. The author owns Ether. You should conduct your own research when making a decision and/or consult with a financial advisor.
For the very first time in a Bitcoin (BTC) bull market, not only long-term investors but also short-term speculators who usually add to the daily sell pressure toward the end of a market cycle have become increasingly confident of higher prices as they hold on to their Bitcoin.
This only adds to the already existing supply shock. If demand remains strong, this is a recipe for another leg up for the BTC price.
Bitcoin selling activity is declining again
Every Bitcoin bull market usually coincided with an increasing number of short-term speculators coming into the market hoping to turn a quick profit, while long-term speculators start to add sell pressure toward the second half of the market cycle to realize their profits.
One of the best on-chain indicators to see this trend unfold in each cycle is called HODL waves. Hereby, the length at which each BTC address holds Bitcoin before they are sold into the market is clustered into term buckets that are then visualized in different color bands.
Bitcoin: HODL Waves. Source: Glassnode
For example, someone who held on to their Bitcoin for five months would fall into the 3m-6m bucket, the light orange color band. If that person decides to sell, it falls out of that bucket and would show up in the 24h-term bucket, the dark red color band.
This means, the redder the colors are in the HODL waves chart on a respective date, the more short-term turnover of Bitcoins happens. This activity is almost at its lowest during a bear market, and at its highest during a bull market, while the short-term activity tends to peak around a bull market top.
Reflecting realized value in HODL waves is critical
Since the Bitcoin price fluctuates significantly during the market cycles, and HODL waves only account for the absolute number of Bitcoins moved, this chart does not account for the total value realized on a respective day by a Bitcoin seller.
As it becomes increasingly lucrative for hodlers to take profit the higher the price rises, the HODL waves can be weighted by the realized price, which is the price at which each Bitcoin on average was last bought /sold.
This adjustment allows for visualizing the value-driven profit-taking on a daily basis through the value-adjusted colored, term buckets.
Bitcoin cycle tops tend to form around the short-term activity peak
Once HODL waves are weighted by the realized price, the Realized Cap HODL Waves are derived, a concept that was first introduced by on-chain analyst Typerbole. This adjustment reveals that the 1w-1m bucket tops coincide with every single bull market top so far.
Bitcoin: Realized Cap HODL Waves. Source: Glassnode
This indicator does not only suggest that the current selling activity is not at a typical bull market peak yet, it even reveals that for the first time in Bitcoin’s bull market history this trend is declining while the price continues to rise.
Bitcoin: Realized Cap HODL Waves 1d-1m. Source: Glassnode
This is a very unusual trend in a bull market. Assuming that the price peak has not been reached yet, this suggests that profit-seekers, whether they are short- or long-term focused, are starting to hold on to their Bitcoin again, expecting higher prices to come and by that adding to the Bitcoin supply squeeze on exchanges.
Bitcoin selling activity relative to the holding period is quite low
Rafael Schultze-Kraft, Glassnode CTO, takes a similar view by looking at long-term hodlers through Coin Days Destroyed, an indicator that shows the total holding days “destroyed” by holders selling their Bitcoin.
Based on a 3-months moving average of this indicator, the destruction has retraced to a level last seen in the summer of 2019 at times where the price peak was already reached.
Ok, this is beautiful.
Experimenting with Coin Days Destroyed: Despite $BTC prices above $50k, 3-month CDD at low levels and recently declining.
Old hands extremely strong here, HODLers showing conviction and doing what they do best.
Doesn’t look like a top to me.#Bitcoin pic.twitter.com/z8OL8Gt73E
— Rafael Schultze-Kraft (@n3ocortex) April 9, 2021
If the price was close to a bull market peak, a much higher indicator value would be expected as long-term holders would be taking profit in material size, which is currently not the case.
Bitcoin spending behavior relative to the market cap is low
When taking this concept of Coin Days Destroyed further and looking at it with respect to average value destroyed in perspective to the market capitalization, one arrives at the so-called dormancy flow. This is a concept invented by analyst and trader David Puell.
The dormancy flow describes the yearly moving average of Bitcoin holders’ spending behavior. It is based on the held value that gets destroyed in perspective to the overall accrued value in the market.
This indicator suggests, the 365-day average spending behavior of Bitcoin measured in USD is very healthy and far below prior bull market spending.
This is Bitcoin rocket fuel
Bitcoin selling activity whether it is from speculators or long-term holders is declining while also the annual spending behavior relative to the market capitalization is surprisingly low. All these on-chain data points suggest that the market is inching to an even deeper supply squeeze. This is one of the best rocket fuels to send the Bitcoin price higher.
However, this is not a guarantee as it requires continuous demand for the price to appreciate in this environment. Therefore, a close eye on high-net-worth individuals and institutions’ demand should be kept, as they have recently been the main driver on the buyer side.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Nothing here should be considered investment or trading advice. Every investment and trading move involves risk. The author owns Bitcoin. You should conduct your own research when making a decision and/or consult with a financial advisor.
