Detailed data on the chain: Bitcoin plummeted 26% in a week, and the difference between bulls and bears is huge

The price of bitcoin fell 26.1% last week as the market reacted to a series of tweets from Elon Musk. As Musk’s tweet expressed concern about the energy consumption of Bitcoin’s proof-of-work (PoW) mining, Bitcoin fell to $43,963 from $59,463 last Monday as his tweet spread.

Additionally, Musk claimed that Dogecoin is 10 times faster and that larger blocks are a viable option. Unfortunately, this led to confusion in the market.

On-chain, we can observe a clear divergence in reaction, with new market participants panic-selling their coins and suffering losses as a result, while long-term coin holders seem to be relatively unaffected by the news. There are plenty of supply and demand dynamics that look similar to the 2017 macro top, but with unique differences that will challenge the beliefs of bulls and bears.

First, we will assess the size of the pullback in the 2017 and 2021 bull markets. Bitcoin’s price is now down more than 28% from its April 13 high of $63,600, the largest pullback in the current bull market, but consistent with five major pullbacks during the 2017 bull market.

On-chain data analysis website DefiLlama launches DEX aggregator: News on January 3, on-chain data analysis website DefiLlama will launch a DEX aggregator, which is still in beta and can get the best price from 8 different aggregators , including 1inch, Matcha, Paraswap, Cowswap, etc. The specific quotation and Gas cost are independently verified by DefiLlama, and support private mode to prevent IP leakage, including Approval control, supporting 22 blockchain networks. [2023/1/3 22:22:18]

In terms of the duration of the bull market, the main bull phase (after the new high) in 2021 has lasted for about 200 days, which is relatively short compared with the bull market in 2017.

Drawdown from ATH Live Chart

The number of currently profitable entities provides insight into the cross-section of the underwater market. We can observe that this pullback resulted in over 23% of on-chain entities (independent wallets) being in the red, compared to three comparable periods of uptrend since 2016. Note that all of these comparative callbacks relate to relatively extreme events:

Data on the chain shows that retail investors’ interest in ADA is growing rapidly: According to news on May 4, according to the data shared by the encryption analysis platform IntoTheBlock on May 4, traders (retail investors) may hold ADA for less than a month. The address balance grew by 186.19% in just 30 days.

At the same time, the number of addresses holding ADA for more than 1 year increased by 6.20%, while the number of addresses holding ADA for 1 to 12 months increased by 10.49%. (Finbold) [2022/5/4 2:50:00]

The first major rally came in 2016 after a two-year bear market.

In 2019, the first major rally came after a 1.5-year bear market, largely as leveraged short sellers were squeezed.

After the massive sell-off caused by the COVID-19 panic on March 12, 2020.

Percent Entities in Profit Live Chart

On-chain data tool Nansen completes $75 million in financing led by Accel: Jinse Finance reported on December 16 that blockchain data analysis platform Nansen raised $75 million in Series B financing led by Accel. Other participants in the round included Andreessen Horowitz (a16z), SCB 10X, Tiger Global, and other prominent VC and angel investors.

The platform will use the funds for its next phase of growth and development, which includes expanding the platform’s capabilities and multi-chain integration globally, as well as hiring top-notch developers and research analysts. [2021/12/16 7:44:33]

Newer market entrants have panic-sold and realized their tokens have lost a lot, with both the aSOPR and STH-SOPR indicators falling below 1.0 again. Both metrics indicate the degree of profit achieved when moving coins on-chain, with higher values indicating profitable coins are moving, while values below 1.0 indicate that most recently bought coins at high prices are moving.

Glassnode Co-Founder: On-Chain Data Shows Bitcoin Supply Can’t Meet Demand: Rafael Schultze-Kraft, co-founder and CTO of crypto analytics firm Glassnode, says on-chain data shows Bitcoin (BTC) is heading straight to Supply crunch. According to the company’s latest data, nearly 2,000,000 BTC have moved from short-term to long-term holdings since April of this year. Glassnode defines a long-term holder as any Bitcoin user who has held Bitcoin for at least 155 days. (Dailyhodl) [2021/9/25 17:04:55]

The aSOPR metric takes into account the entire market, while also filtering out all coins that are less than 1 hour old (usually ephemeral and therefore not economically important). STH-SOPR only filters coins under 155 days old and thus represents entities buying coins during the current bull market cycle.

Both of these metrics have dropped below 1.0, indicating that coins moving on-chain are generally at a loss, and this is most evident in the STH-SOPR metric. This is the second time the STH-SOPR indicator has dipped below 1.0 during this correction, indicating widespread panic selling by new holders.

Data on the Bitcoin chain shows: Miners believe halving will push up the price of Bitcoin: Joe Nemelka, a data analyst at the on-chain data company CryptoQuant, recently said that an increase in the flow of Bitcoin from miners to exchanges may indicate upcoming price volatility. According to Nemelka, the ratio of miners’ Bitcoin inflows to exchanges compared to all other inflows (other exchanges, wallets, etc.) is noticeable. In the graph of the percentage of miners flowing into exchanges, some peaks are above 6%, which indicates a change in the price trend. The Percentage of Miners Flowing into Exchanges dataset allows market participants to spot peaks in miner selling pressure, while the Miner Position Index allows us to understand trends in how they are holding or selling Bitcoin. Miners have been holding Bitcoin since January, possibly hoping to sell it at the post-halving price. Mason Jang, Chief Strategy Officer of CryptoQuant, said, “The MPI (Miner Position Index) highlights that historically, the daily outflow of Bitcoin value from miners has been at extremely high or low levels. An MPI value greater than 2 indicates that most miners are selling Bitcoin. Likewise, if the MPI is less than 0, it means less selling pressure from miners." (Cointelegraph) [2020/5/2]

aSOPR and STH-SOPR Live Chart

The total number of addresses with non-zero BTC balances has also dropped by 2.8% from the recent all-time high of 38.7 million addresses, with a total of 1.1 million addresses dumping all of their holdings during this pullback, again providing further insight into the ongoing Evidence of panic selling experienced.

Non-Zero Addresses Live Chart

If we look at the cyclical pattern of the total supply held by short-term token holders (STH), we can also see a pattern of panic selling playing out, similar to what was observed at the 2017 macro peak. What this chart shows is that the Bitcoin market tends to experience local or macro peaks when new holders own a relatively large percentage of the total supply. However, it is worth noting that the peak value of coins owned by short-term holders, both in terms of number of coins and as a percentage of circulating supply, is significantly lower than in 2017. Coins from new holders recently reached 28% of the circulating supply (5.3 million BTC), which is 9% below the peak in 2017.

Given that Bitcoin is trading at a much larger market cap, this may reflect the large capital inflows required to achieve market cap size. It also suggests that this could be a pullback on a larger timeframe in a bull cycle, during which weak hands capitulate and stronger hands resume accumulating cheaper coins.

Supply Held by Short Term Holders Live Chart

Evidence that also supports our panic selling conclusion is the recent record high BTC inflows into exchanges, where we observed net inflows of 27,500 BTC to exchanges before the most recent pullback began. Such an inflow scale has only appeared in history during the sell-off wave in March 2020 and the Ponzi scheme sell-off wave of PlusToken in 2019.

All exchanges Net Flows Live Chart

However, if we break down this observation to the two largest exchanges — Binance and Coinbase — then we can see two different scenarios.

Binance, which has largely captured non-US entities, the go-to venue for retail speculators and investors, is also the biggest recipient of this net BTC influx. It can also be seen that the number of inflows and outflows has increased over the past few months, indicating fluctuations in the macro sentiment of Binance users. This further suggests that recent inflows may have been driven by new market entrants (panic sellers) or by a shift of capital into other cryptoassets.

Binance Net-flows Live Chart

Conversely, Coinbase has been in a situation of net BTC outflows since Bitcoin breached the previous cycle’s high of $20,000, a trend that has continued this week. Coinbase is the go-to place for U.S. institutions to accumulate BTC, and given the typical daily withdrawal size (10,000-20,000 BTC per day), this suggests that larger buyers are still actively accumulating BTC during this pullback.

Coinbase Net-flows Live Chart

Relative to panic selling by new entrants, long-term coin holders appear to be bargain hunting to accumulate cheaper coins. While the number of non-zero addresses has declined during this pullback, the number of addresses accumulating has increased by 1.1% since the most recent low. Whereas accumulating addresses are defined as those addresses that have at least two input transactions, but never spend any coins.

Accumulation Addresses Live Chart

Similarly, the supply held by long-term token holders (LTH) has returned to an accumulation pattern, which again resembles the 2017 macro top. The chart largely reflects buyers who purchased coins in late 2020/January 2021 but did not spend them. As the supply of long-term token holders (LTH) began to increase, it indicated that the amount of mature coins with a dormant period of more than 5 months exceeded the amount of old coins used to realize profits.

The current Bitcoin supply held by LTH exceeds 2.4 million BTC (accounting for 8% of the circulating supply), which exceeds the peak in 2017. This shows that a large number of coins have been moved to illiquid cold storage wallets, and this trend continues.

Long-Term Holder Supply Live Chart

Overall, the bitcoin market is currently in the midst of a historic major correction. There are strong signals that panic selling by short-term holders is currently dominating, while long-term holders are opting for bargain hunting, their confidence largely unshaken. The PoW energy drain narrative is delicate, to say the least, and what follows will be a test of faith in the entire Bitcoin market.

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