After the Bitcoin plunge triggered a wave of bottom buying?

Note: The original author is CHECKMATE, a data analyst at glassnode.

Last week, Bitcoin experienced a lot of volatility. Before the highly anticipated Coinbase direct listing, the BTC price once hit an all-time high of $64,717. However, this was short-lived. By Sunday, Bitcoin plummeted to $52,829 in a short period of time. At the low point, the decline reached -18%.

There are many narratives in the market that try to explain this volatility, such as "Coinbase's listing is less than expected", "Bitcoin's network computing power has plummeted by more than 40%" and "billions of dollars in leveraged liquidation". This week, we'll assess the data behind these narratives and explore new accelerating trends that may be dominated by retail players in the Bitcoin market.

One of the main narratives surrounding Sunday’s sell-off is that the market was spooked by a sharp drop in network hashrate (although Sunday’s sell-off happened later than the change in hashrate, so it’s unlikely that the hashrate sell-off was the main driver). The drop in computing power is reported to have started late on April 15 due to power outages and coal mine accidents in the Xinjiang region of China, one of the main areas for Bitcoin mining.

The third richest man in Mexico: 10% of his assets are in Bitcoin: Ricardo Salinas, the third richest man in Mexico, said in a discussion with the director of Blockchain Land that 10% of his assets are in Bitcoin. All the benefits of bitcoin qualify it as a modern form of gold that is easily portable and enjoys high international liquidity, he said. And most importantly, Bitcoin has a finite supply. In addition, he is not optimistic about altcoins, and believes that altcoins have no potential to surpass Bitcoin. (Bitcoinist)[2021/6/24 0:02:28]

It is reported that the average block interval time of Bitcoin (the protocol difficulty target is 600 seconds) began to rise later on the 15th, and reached a peak of more than 1300 seconds (21.6 minutes) two days later. Since then, the computing power of Bitcoin's entire network has begun to recover, and the average block interval time has accelerated to 1000 seconds (16.67 minutes).

The impact on the computing power of the entire Bitcoin network is from the high point of 203.37 EH/s to the lowest point of 114.27 EH/s. About 43.8% of the computing power suddenly went offline. Up to now, the computing power of Bitcoin has recovered 33% , about 151.97 EH/s.

Whale Alert detected two bitcoin transfers of more than US$100 million: On January 8, Whale Alert detected two bitcoin transfers of more than US$100 million, one of which was 3,400 bitcoins (about US$129 million). The other is a transfer of 4306 bitcoins (about 163 million U.S. dollars) between two anonymous wallet addresses. Recently, Whale Alert has detected multiple wallet address transfers of more than US$100 million. [2021/1/8 16:43:36]

It should be noted that the computing power is not clearly known, but is estimated based on the current mining difficulty and the observed block interval. Given the natural variance between blocks, especially over short time periods, it is not uncommon for hash rate estimates to vary between different sources and on different timescales.

Update on April 20: According to further estimates by Chinese miners who have learned about the incident, the incident caused a 20%-25% drop in the computing power of the entire Bitcoin network, which indicates that there are natural differences in computing power estimates in the short term.

Voice | Analyst: Bitcoin may become a safe-haven asset once usage increases: Analyst Omkar Godbole recently tweeted why Bitcoin is a risk asset rather than a safe haven? Because Bitcoin is something like a market for art, where expensive art is a symbol of legitimizing the status of the super rich, record auction prices almost always occur when a credit bubble/economic boom bubble bursts. During this period, the less artistically savvy were eager to buy status symbols. Bitcoin investors lack blockchain knowledge, are thrill-seekers, and the price is too high for ordinary investors, so Bitcoin adoption and mainstream usage is low. This makes it a risk asset similar to the art market. Bitcoin could become a safe-haven asset once usage picks up. The approval of an ETF that makes BTC accessible to traditional investors will increase BTC’s appeal. [2019/10/16]

As is customary in the Bitcoin market, excessive leverage gets washed away during rapid price swings, and this week was no exception. Many traders increased their leveraged exposure in the last week, likely in anticipation of the Coinbase direct listing, and as a result, the risk of leveraged liquidations accumulated in the system.

Open interest on major derivatives exchanges hit an all-time high of $27.4 billion last week as the price of bitcoin rose to new highs, and by Sunday afternoon some $4.9 billion in futures contracts had been hit. Liquidations, most of which occurred during Sunday's sell-off.

Voice | Xiao Lei: It’s not far from Wall Street taking over the Bitcoin industry: Xiao Lei, a financial columnist, said in an article today that the operation of funds behind stablecoins is kept under strict secrecy, making it impossible for the official level to know the real existence of its funds And the operation situation, when the scale starts to grow, the stable currency will be another kind of existence and threat. For the United States, what needs to be more vigilant is that if one day, the stablecoins in the cryptocurrency industry no longer need legal currency endorsement, that is, they no longer need US dollar endorsement, just like the decoupling of the US dollar from gold in 1971. In the short term, stablecoins will Significant depreciation, but in the long run, just like the U.S. dollar has gotten rid of the shackles of gold and become a real world currency, the logic of stablecoins getting rid of the U.S. dollar in the future may be similar to the logic of the U.S. dollar getting rid of gold. Because of this, on the one hand, the United States has conducted large-scale investigations on cryptocurrency trading venues and stablecoin providers, and on the other hand, it has begun to touch the entry of regular troops that can be incorporated into the Wall Street operating system. [2019/6/16]

Among them, the long liquidation of Binance, BitMEX and OKex reached a peak of 1.847 billion US dollars, which is almost twice (+95%) the liquidation high set on February 22. It is worth noting that the Bitcoin derivatives market liquidated excessive leverage very quickly, and the entire liquidation event was completed within an hour window.

Hedge Fund Pantera Bitcoin Fund: 25,004% return on investing in Bitcoin in 2017: Hedge funds investing in Bitcoin have achieved amazing returns. According to an investment return letter sent to investors on Tuesday, the hedge fund Pantera Bitcoin Fund, established in 2013, said its investment return rate reached 25,004% in 2017, while the compound annual return rate during 2013-2017 was 250%. .[2017/12/20]

The financing rate of the perpetual contract once fell to a negative value of -0.017%, setting a new cycle low in this round of bull market, while the previous futures financing rate was reset to zero or slightly negative, indicating that leverage has been washed out on a large scale. This is usually positive for prices in the weeks that follow.

In terms of on-chain data, the Short-Term Holders (STH) SOPR indicator has also reset below 1.0, the most notable since Bitcoin crashed to $29,000 in January. This indicator tracks the profit or loss of the currency transfer on the chain. When the SOPR indicator is greater than 1.0, it indicates a profit, while less than 1.0 indicates a loss. sky).

Since the short-term holder SOPR indicator has dropped below 1.0, this suggests that some new holders have lost heavily during this dip. However, the lower SOPR indicator also shows that profitable new holders have not been shaken out, indicating that the market is relatively strong.

Similar to contract financing rates, resetting the SOPR indicator has historically been positive for prices in bull markets.

After looking at the old coins, we can see that both the CDD indicator and the dormancy indicator have risen slightly this week, but both remain within the relatively stable range established since mid-January. Both metrics track the age of spent coins, and both metrics increase as older coins move on the blockchain. This is a trend to watch, as any strong uptrend could be a sign that older coins are starting to profit on a more significant basis.

The long-term holder SOPR indicator tells a similar story and shows that throughout the course of March and April, the old coin has been turning a profit (and pocketing it). Intermittent spikes in the long-term holder SOPR metric indicate that long-term holders are realizing profits, which can increase liquidity supply as dormant coins are reactivated in circulation.

However, in the sell-off wave last weekend, long-term currency holders did not panic sell, but chose to wait and see.

As a result, the long-term holder SOPR indicator has also returned to relative lows, last seen at the bottom of Bitcoin at $43,000 in late February.

One potential risk associated with last weekend's sell-off is a drop in the price of Bitcoin to $53,500, which would imply a drop in Bitcoin's market capitalization below $1 trillion.

Subsequently, Bitcoin did rebound strongly and closed at $56,163, which was well above the critical point of $53,500. This brings the market back into a strong volume cluster. As of now, BTC equivalent to 14.32% of the circulating supply has moved above $53,500.

Previous installments discussed how such clusters of on-chain transaction volume might provide strong support and help justify the $1 trillion valuation (as it currently is). In this $1 trillion support zone, 1.189 million BTC are moving above the $53,500 price but below $57,000, which equates to 6.37% of the circulating supply.

However, some of these coins could become indirect supply if market sentiment turns negative. As such, this volume profile, along with metrics that track old coin spending behavior, are key on-chain metrics to keep an eye on during periods of market correction.

The trend of retail participation in the market continued to accelerate this week as the growth of new addresses on-chain continued its parabolic rise. We define the growth of a network entity as the change in clusters of independent addresses that create (new UTXOs) and burn (spent coins).

Before November 2020 (before Bitcoin broke through $20,000), the net growth of Bitcoin unique addresses was relatively stable, and since then, we have seen a parabolic increase in the number of new addresses, and a new high was hit earlier this week.

If we examine the average size of new UTXOs created on-chain, we can assess the "typical investment size" of new entrants. We can see that during the accumulation phase in late 2020, the median UTXO was around 1 million Satoshi (0.01 BTC), which equated to $90-$120.

With both Bitcoin price and entity net growth moving upwards, the median UTXO value has dropped to 300,000 to 400,000 satoshis (66% decrease), but the fiat currency value has increased to $180 to $220 (a 2x increase), which is It shows that the purchasing power of BTC has increased by about 600%.

Finally, retail speculation appears to be on the rise, as evidenced by the recent outperformance of many altcoins. Among them, Binance is one of the most popular trading venues for retail investors, and among all major exchanges, its BTC inflow is the most obvious.

The BTC balance held by Binance has been growing steadily since the price of Bitcoin topped $20,000, but has accelerated over the past two weeks, suggesting increased retail speculation.

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