Over the last month, bitcoin has arguably been unprofitable compared to the strength of ethereum and the craziness of various animal coins. However, on-chain indicators still show a strong willingness to hold by bitcoin miners and long-term holders, and the overall trend remains bullish. At the same time, there are also signs that some of Bitcoin’s money is rotating, with ethereum emerging as the main beneficiary.
In 2020 and early 2021, changing macroeconomic conditions drove the rise of Bitcoin and brought in a new wave of institutional investors. Now, macroeconomic conditions could once again favor bitcoin’s rise.
The dollar index (DXY) rallied in March but weakened in April and fell again last week. Monetary easing will likely last longer than previously expected, as there are signs that the economy is still recovering. Historically, bitcoin has been rising during periods of dollar weakness, so this is good news for bitcoin.
| Futures Market
In the futures market, open interest in BTC perpetual futures has reset to its lowest level in months, suggesting that leverage has been cooled, providing a healthier base for BTC’s rise.
| On-chain price cost distribution
Despite its recent relatively weak trend, Bitcoin remains above the trillion dollar market cap support level ($53,475), as seen in the URPD indicator (on-chain volume in different price zones), which has a higher on-chain volume in the $53,500-57,500 range (2.93 million BTC), which we can consider as the price level at which chips change hands, i.e. creating a new cost base, and the level of realized gains and losses for the seller. On the other hand, the $57,500-$64,000 range has an on-chain volume of 678,000 coins, which is the price resistance zone.
| Miner and OTC data
So far in April, miners have re-entered coin hoarding mode, with miners’ wallet balances showing net growth. The data shows that miners are hoarding coins at an increasingly high rate, indicating their strong belief and optimism.
The 14-day moving average of miners’ net positions shows that miners’ hoarding behavior is an important reference for the movement of the coin price. Miners are currently hoarding up to 6,000 BTC per month, which implies very strong bullish confidence after bitcoin production has been cut in half.
Since miners are usually closely associated with OTC trading, we can also look at the trends in OTC trading to assess the buying demand of large buyers.
According to data provided by the 3 largest major OTC trading platforms, their total balance of BTC holdings has been in a steady decline throughout 2021, and this week, their balance slipped to a low of 6,000 BTC. This suggests that demand from large buyers is eating into the available supply on OTC trading platforms. As seen in the chart above, the trend of oversupply of OTC trading platforms began in December 2020 (near the BTC price of $10,000), which coincides with a strong increase in institutional interest.
| Holdings and Funding Rotation
Bitcoin’s current consolidation has many similarities to 2020 and is in the same absorption phase. the CDD indicator (7-day moving average) shows the trends and spending behavior of early holders and can be used to assess the current behavioral trends towards these large investors.
January-October 2020: the CDD indicator is in a sideways oscillation, indicating that early chips are generally dormant and are hoarding coins.
October-December 2020: CDD trending higher, indicating accelerated early chip liquidation as Bitcoin breaks above $20,000.
Jan-Mar 2021: CDD trends lower as market confidence returns, while early chip liquidation slows.
March-May 2021: CDD oscillates sideways again, indicating that early chips are in a relatively dormant state and the market as a whole has returned to a hold and hoard mode.
It is worth noting that the recent CDD indicator is still slightly higher compared to January-October 2020, suggesting that there is still some cashing out of early chips.
Indicators of persistently held or lost bitcoins suggest a similar picture.
The growth of hoarding is very pronounced in the mid-to-late 2020s.
A strong trend towards cashing out in late 2020.
A slowdown in the trend of hedging down in early 2021.
From March 2021 to the present, the indicator has been in a sideways phase of reabsorption and money rotation. Most of the early chips are dormant and maintain bullish confidence, and it is also the stage where chips change hands and raise the average cost of holding coins.
Next, we take a look at the changes in bitcoin balances on Coinbase and Coinan, the two largest exchanges.
The bitcoin balance on Coinbase continues to trend downward in steps, suggesting that interest in bitcoin from US institutions is still growing. Coinbase’s bitcoin balance has also been decreasing from the end of last year until the end of April this year, however, since the end of April this year, its bitcoin balance has started to show an increase.
Given that Coin On is a venue for retail speculation and that its cryptocurrency market has extremely high liquidity, this situation likely represents a rotation of funds, where some bitcoin holders sold their bitcoins and moved on to the frenzied cryptocurrency hype.
| Ether becomes the beneficiary
Over the past three weeks, most of the money has rotated to Ether and Dogcoin. Comparing Bitcoin’s UTXO to Ether price charts, we can see a correlation. at the end of April, some longer held Bitcoins (6 months-3 years) saw cash out, while Ether prices almost doubled in the same period.
On-chain activity in Ether has increased significantly over the past few weeks, indicating that its economic traffic is supporting the price increase. As shown in the chart above, there has been strong growth in many metrics on the ethereum chain, including the total number of smart contract calls, transactions on Uniswap, number of transfers and number of stablecoin transfers on the ethereum chain, among others.
The ethereum chain also saw a record number of daily transfers as increased gas limits spurred maximum transaction throughput. This week, the number of daily Ether transfers peaked at 1.63 million, a 22.5% increase over the 2017 bull market peak. Despite signs of capital rotation hype, overall, the surge in Ether prices is backed by strong on-chain metrics and fundamentals, making its rise more sustainable than many flash-in-the-pan cottage coins.
The total market cap of the cryptocurrency market is currently around $2.5 trillion, slightly higher than Apple’s $2.1 trillion market cap. Compared to the $10 trillion total market cap of the 2000 Internet bubble, the cryptocurrency market is still in its early stages. Therefore, there is no need to prematurely speculate on the top of the bull market at this time.
The fundamentals of the cryptocurrency industry have changed drastically since 2020 and have even grown to the point where macroeconomic influences, such as inflation, interest rates, and monetary policy, need to be considered, whereas previous bull markets did not need to consider these issues at all. The current bull market is much more complex than it was 3 years ago. It is no longer the purely speculative market that used to be outside of traditional money, but has a more diverse and higher order of participants, representing a new financial trend. If you’re already on this train to the future, it’s perfectly fine to let the bullets fly a little longer under the premise of good risk control.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/bitcoins-trillion-dollar-market-cap-comeback/
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