Three On-Chain Indicators Show: Bitcoin Sell-Off Is Nearing Its End, Bull Market May Continue

With bitcoin prices showing signs of new bullish momentum, data from various on-chain indicators suggest that the current sell-off is drawing to a close.

By YASHU GOLA

Bitcoin entered a consolidation phase after its price dropped from $42,600 to $30,000 on Coinbase on May 19. Bitcoin quickly regained lost ground and reclaimed $40,000, but it failed to record a significant bullish breakout above this resistance level, and at the time of writing, the price remains suppressed below $40,000.

Recent price action in the bitcoin market has been up and down, with traders showing no clear short-term bias. Some analysts predict that if the BTC/USD price fails to break above $40,000, it is likely to fall to $20,000 in the coming days.

Interestingly, some on-chain indicators tell a different story. One of the most interesting themes keeping Bitcoin’s bullish bias intact is witnessing long-term holders and accumulating addresses hoarding more BTC during the recent price drop.

In addition, an indicator known as “Bitcoin Entity Adjusted SOPR” (Spent Output Margin) suggests that the market in general is no longer selling Bitcoin at a loss.

Three On-Chain Indicators Show: Bitcoin Sell-Off Is Nearing Its End, Bull Market May Continue

Bitcoin Entity Adjusted SOPR Source: Glassnode Meanwhile, on-chain data shows that reserves on exchanges have declined, a signal that traders have moved their digital assets to cold wallets or into DeFi liquidity pools for more lucrative returns.

While short-term views may lean toward a bear market, the following three on-chain indicators suggest that the price of bitcoin may be bottoming out

Bitcoin: Spent Output Age Band
The correction in bitcoin’s price has led to three reactions in the spot market. The first is a panic sell-off by short-term traders, who sold bitcoin to cut their losses, probably because they bought the cryptocurrency near its highs.

The second reaction was a decision by holders to hold their bitcoin supply. They showed bullish long-term belief in bitcoin through supportive macroeconomic fundamentals – such as ultra-low interest rates, low yields on government bonds, inflation concerns and a falling U.S. dollar – which made a hedged asset like bitcoin look attractive to holders attractive.

The best way to create wealth with bitcoin is to get bored. Two quick and easy steps.

  1. buy
  2. hold

It’s really that simple.

  • Paul McNeal #BTC100K (@_CryptoCurator) May 28, 2021

The third reaction is a mix of holders and hoarders, with traders taking advantage of the falling price of bitcoin to buy more cryptocurrency at a “discount”.

Various on-chain metrics show a huge contrast between the bitcoin reserves held by short-term and long-term holders during the price crash.

For example, in the “Bitcoin: Spent Output Age” chart below, the number of bitcoins sold in the last week is more likely to be between one day and one week. These coins are constantly moving in and out of the market, accurately reflecting the volatile state of the market price last week. Spent Output Age Bands provides a graph of the age distribution of bitcoins before they were spent on a given day.

Three On-Chain Indicators Show: Bitcoin Sell-Off Is Nearing Its End, Bull Market May Continue

Bitcoin Spent Output Age Range by 7-Day Moving Average

Source: Glassnode

Meanwhile, bitcoins that have been unspent for 1 to 3 months and 3 to 6 months have changed addresses following the recent price crash.

Three On-Chain Indicators Show: Bitcoin Sell-Off Is Nearing Its End, Bull Market May Continue

Traders who held 1-6 months of bitcoin in their wallets moved them in May

Source: Glassnode

Another Glassnode metric, called “Bitcoin: Total Supply Held by Long-Term Holders,” shows that long-term holders – entities that have held bitcoin for more than six months – are the biggest beneficiaries of token sales by short-term holders. are the biggest beneficiaries of token sales by short-term holders.

Three On-Chain Indicators Show: Bitcoin Sell-Off Is Nearing Its End, Bull Market May Continue

Supply of Bitcoin Held by Long-Term Holders Grows Amid May’s Plunge

Source: Glassnode

In his weekly report to clients, Anthony Pompliano, co-founder of Morgan Creek and founder of Pomp Investments, said

Long-term holders are adding to their positions, short-term holders are selling, and some entities among short-term backers have now reached the 155-day threshold for this metric and are now into long-term backers.

This discrepancy points to the long-term stability of the bitcoin price as more and more serious holders take a stand against the unfolding macroeconomic crisis.

Bitcoin Balances on Exchanges Decline
Net reserves of bitcoin held on cryptocurrency exchanges have also declined over the past seven days, suggesting that fewer traders now want to sell their bitcoin holdings.

This indicator points to a typical trading behavior. Traders only deposit bitcoins into their exchange wallets when they want to sell them for fiat currency or trade them for other digital assets. As a result, bitcoin reserves on trading platforms rise.

Three On-Chain Indicators Show: Bitcoin Sell-Off Is Nearing Its End, Bull Market May Continue

Bitcoin Reserves on Exchanges Down 14,207 BTC in Last 7 Days

Source: Glassnode

Instead, the large number of BTC withdrawals reflects traders’ decision to hold the cryptocurrency. This means that Bitcoin is not under immediate selling pressure in the spot market, which is what Glassnode’s recent data shows.

Bitcoin Accumulation Addresses and Balances on the Rise The total number of accumulation addresses and the balances within these wallets are on the rise. An accumulation address is one that has received at least two BTC transactions, but has never moved assets out of that address.

Three On-Chain Indicators Show: Bitcoin Sell-Off Is Nearing Its End, Bull Market May Continue

Convinced Bitcoin Bull Market Continues to Accumulate Amid Price Decline

Source: Glassnode

Over the past seven days, the number of these cumulative addresses has climbed, adding 7,430 new wallets.

Another metric called “Bitcoin: Supply Held by Entities with Balances of 0.01 – 0.1” shows that new users have entered the Bitcoin network during the price drop. In addition, the supply held by addresses with balances between 0.001 BTC and 1 BTC also increased in tandem, indicating a steady increase in retail interest.

Three On-Chain Indicators Show: Bitcoin Sell-Off Is Nearing Its End, Bull Market May Continue

Supply of BTC held by wallets holding 0.01-0.1 BTC spikes when bitcoin price falls

Source: Glassnode

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/three-on-chain-indicators-show-bitcoin-sell-off-is-nearing-its-end-bull-market-may-continue/
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