Will Bitcoin break out of previous highs after consolidating?

Summary: Bitcoin prices continued to move higher this week, bouncing from a low of $53,333 to an intraday high of $59,454. Prices remain in "trillion dollar" range established since early February

Bitcoin price continued to move higher this week, bouncing from a low of $53,333 to an intraday high of $59,454. Prices remained within the "trillion dollar" range established since early February.

On-chain signals continue to support strong HODLing demand from miners and long-term holders, as overall spending patterns remain bullish. However, there are also signs that a portion of BTC funds are range-bound, while Ethereum gains overall.

After falling below the $1 trillion market capitalization level (~$53,475) during the latest pullback, the price of the Bitcoin market is back above major on-chain support levels. We can see this in the URPD indicator, which is designed to show volume in different price zones.

We can think of this as the price level at which BTC changes hands, creating a new cost base for buyers, and the level at which gains and losses are realized for sellers. The price region above the $1 trillion threshold is the most significant on-chain support since $1 trillion, and the market is currently at the high end of that range.

Wall Street Analyst: Institutional Investors’ Interest in Bitcoin and Mining Stocks Is Growing: Jinse Finance reported that analyst Christopher Brendler of Wall Street firm DA Davison wrote on Monday that institutional investors’ interest in Bitcoin and crypto mining stocks is growing, This is despite the fact that most of these investors are still relatively unfamiliar with the industry and take mining stock valuations with a grain of salt. The analyst said he estimates about 15 percent of Wall Street brokers are now taking bitcoin seriously, up from about 5 percent at the start of the year. [2021/10/26 20:56:54]

BTC volume equivalent to 12.1% of circulating supply (2.93 million BTC) now forms on-chain support below the current price. A small amount of 6.778 million BTC (3.63% of supply) was moved above the current price, which could act as resistance.

Throughout April and May, most miners have switched to storing coins, and the net change in miner balances is green. This metric is calculated by looking at the net change in miner balances over a period of 30 days.

ZB (ZB) market research report: Bitcoin will usher in a correction in the coming week: According to the ZB (ZB) market research report, the current price of Bitcoin is above the 50-point moving average, and this is used as a dynamic support. The price created a market structure of highs and lows; the relative strength index reached the positive area of ​​78.77 after a week-long correction; and the MACD indicator shows that Bitcoin’s momentum is still biased towards bulls, or it will continue to hit new highs. The previous large-scale sell-off led to the formation of a bearish meteor signal in the price of Bitcoin over the weekend, which may lead the bears to correct the rebound in the coming week. According to the report, the main hurdle for the price of Bitcoin is $18,037. In addition, the report also makes a one-week technical analysis of Ethereum. For more details, please refer to the official research report released by ZB. [2020/11/16 20:57:45]

The metric currently shows that miners are not only accumulating funds on a net basis, but are accumulating funds at an increasing rate, suggesting a strong belief and optimism.

If we zoom out and apply a 14-day moving average (equal to the difficulty adjustment period), we can see that the current rate of miner accumulation is actually historically significant. The current change in net position compared to three instances in the last five years.

Summa launched a cross-chain transaction system for Bitcoin and Ethereum: On April 7, the decentralized financial service provider Summa launched an open-source "cross-chain transaction system", which will provide non-trusted parties, non-custodial private self-executing cross-chain Contract to realize cross-chain transactions between Bitcoin and Ethereum. Currently, the cross-chain system code is submitted to Github. Prior to August 2019, Summa had joined forces with the privacy protocol layer Keep to launch a cross-chain working group to realize the use of Bitcoin in the Ethereum ecosystem. (Coin Gape[2020/4/7]

At a rate of accruing 6,000 BTC per month (after the halving), this suggests that miners are HODLing about 22% of block subsidy issuance over the same period (900 BTC/day x 30 days = 27k BTC/month).

Since miners are often closely associated with OTC exchanges that distribute cryptocurrencies, we can review OTC trends to estimate buying demand from large buyers.

The total balance held by the three OTC desks we track has continued to decline throughout 2021, hitting a low of just 6,000 BTC this week. This suggests that demand from larger buyers outstrips available supply at these OTC desks. Furthermore, the trend apparently started in December 2020 when miners were heavily distributed. This coincides with a strong increase in institutional interest in the asset as a macro investment.

VOICE | Twitter User: Nearly Half of Bitcoin Cash Network Transactions Are Linked to an Address: Nearly half of all Bitcoin Cash network transactions are linked to an address, according to Twitter user @IamNomad. The address 1b1itzeSKYEKhdcthUSnNJ47Fx2U8Zwwn completed its first transaction on April 8, with a total of 575,000 transactions completed as of press time. [2019/5/7]

The current scope of consolidation has many on-chain similarities to 2020 in the market, and this is largely a period of accumulation. The binary CDD indicator (7-day moving average) shows the trend and spending behavior of older coins, providing a proxy estimate of what the smart contract generation is doing.

Summary for last 12 months:

June-October 2020: Binary CDD trades sideways, indicating that older coins are generally dormant and accumulating.

October-Dec 2020: Binary CDD is trending higher, showing that older coins are spending at a higher rate to realize profits after breaking the $20,000 ATH.

Bitcoin rose back to 50,000 yuan overnight. Investors need to pay attention: Bitcoin rose by more than $500, or about 7%, to a new record high of $7976.80. [2017/11/17]

Jan-March 2021: As confidence and market confidence returns, binary CDD trends lower and legacy tokens lower their payouts.

March-May 2021: Binary CDD is trading sideways again, indicating that old coins are relatively dormant and the market has returned to HODLing and re-accumulation mode.

However, it should be noted that binary CDD was trading at a higher price in mid-2020, suggesting that spending of the old coin is still happening.

The HODLed or Lost Cryptocurrency Metric tells a similar story, but explains more about the current period. This metric measures the estimated supply allocated or lost, we can see:

In the middle and late stages of 2020, the accumulation and balanced growth are very obvious,

Spending was strong in late 2020,

Spending slows in early 2021.

These observations agree very well with the binary CDD observations above.

However, in the current period (March 2021-present), this HODLed balance has been trading sideways (not accumulating as much as expected) with short payouts. While this confirms that older BTC is generally dormant and maintains bullish market confidence, the continued accumulation is offset by slightly larger distributions.

If we look at the BTC balances on the two largest exchanges, Coinbase and Binance, it becomes clear where these spent BTC are going.

Coinbase balances continue to trend in a "step-up" trend, suggesting U.S. institutional interests are still at play.

Binance balances have been growing throughout 2021 and actually started growing faster since early April before Coinbase ran out.

Given that Binance is the largest exchange and has some of the most liquid altcoin markets, as traders take advantage of altcoin volatility while Bitcoin price consolidates, there's a good chance BTC's recent spending is indicative of a capital round move.

As if it wasn't already obvious, Ethereum (...and DOGE) has been the main recipient of most of the capital flow, having done well over the past three weeks. To demonstrate this effect, we can plot the spending behavior of plausible old Bitcoin UTXOs between 6m and 3y and compare it to the ETH price chart.

While this is only an empirical observation (correlation > causation), it makes a compelling case for a significant increase in these older BTCs coming back into circulation after prolonged holding. This time around, the Ethereum price nearly doubled from $2,200 to an ATH of $4,000.

We can see the relative magnitude of this capital rotation in the “Age of Exhausted Output” band, where from mid-April there was a marked uptick in old BTC spending behavior as BTC prices consolidated.

Activity on the Ethereum chain has increased significantly over the past few weeks, suggesting that on-chain economic flows support price gains. Many metrics on-chain saw strong growth, including total transaction exchange rates and USD settled in ETH transfers, to name a few.

Finally, the daily transaction volume of the Ethereum chain reached another on-chain ATH as the increased gas limit increased the maximum transaction throughput. This week’s ATH reached 1.63 million transactions per day, a 22.5% increase from the previous peak set before the macro top in 2017.

checkmate Author

Translated by Zheng Qirui

Editor Zheng Qirui

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