What is the outlook for Bitcoin? Let’s take a look at the data on the chain
On November 26, with the help of the new variant of the new coronavirus in South Africa, a big negative line in the market suddenly extinguished the enthusiasm of the market. The argument of “a” has gradually emerged.
At the same time, we found that in the face of several recent callbacks, on-chain analysts are determined to see more, and their basis is that from the data on the Bitcoin chain, the bull market is still there, and it is not the tail stage.
In this article, we will try to combine the data statistics of the Glassnode on-chain data platform to review the performance of Bitcoin’s on-chain data and understand the reasons why the on-chain analysts are determined to see more; finally, try to diverge thinking and think about possible future markets. evolution.
Supply and demand determine the price
First of all, we have to return to an essential consensus that the relationship between supply and demand determines price changes .
Therefore, we can infer the possible cyclical changes in prices by studying the market supply and demand relationship of Bitcoin. In terms of on-chain analysis, it is to study the exchange of hands between long-term holders and short-term holders of Bitcoin . Note: Long-term holders are considered as long-term holders of currency for more than half a year.
In a bear market, long-term holders act as demanders (buyers) to accumulate and hoard coins; short-term holders act as suppliers, panic selling;
In a bull market, long-term holders act as the supply side (seller), and the shipment takes profit; short-term holders act as the demand side and actively buy;
According to the above comparison chart of the price trend of Bitcoin’s historical cycle and the trend of long-term holders’ currency holdings, we can also understand:
- The trend of the total holdings of long-term holders tends to gradually begin to accumulate coins at the beginning of the bear market. This process of continuous accumulation basically covers the entire bear market cycle corresponding to the price cycle, and stops when the price of Bitcoin is close to a record high. Occasion.
- When the price of Bitcoin is close to a record high, the total holdings of long-term holders basically reach near the apex; the next step is the process of long-term holders continuing to ship and take profit in the unilateral rise, until the end of the bull market. , The bear market is coming.
- Repeat this week…
Next, we will focus on the past six months to specifically analyze the current trend of long-term holders’ currency holdings:
From the picture above, we can understand:
- Near the Bitcoin highs in April, the long-term holders’ holdings have basically bottomed out; then in the next 5 months, with the bloodbath of 519 and the subsequent decline, the long-term holders’ holdings The previous high was quickly recovered, and in the subsequent price increases, holdings continued to rise.
- In addition, it is also in line with what we mentioned above: when the price is close to the historical high, the long-term holders’ currency holdings basically reach near the apex. As Bitcoin breaks through the 6.5w USD to a new high, long-term holders have also announced that their holdings have temporarily reached its peak, showing a preliminary downward trend.
Here, in fact, it is easy for us to fall into a trap, thinking:
Then, according to the historical script, it should mean that the price of Bitcoin will usher in the main rise in the future, and long-term holders will gradually take profits during the rise, and the holdings of long-term holders will gradually decline.
We cannot take it for granted here.
When the currency holdings of long-term holders rose to a certain amount, historically, the market happened to go out of the direction of skyrocketing, so the long-term holders naturally gradually profited.
In the unknowable situation in the future, we cannot believe that the development direction of the market will definitely skyrocket.
However, since long-term holders tend to take profits in the bull market, rather than sell their meat in panic, a large amount of circulating bitcoin is now in the hands of long-term holders, so the potential selling pressure in the market is not high.
This is the conclusion we can infer. As for the future direction of the market, it is unknowable.
But we can once again return to the essential consensus: the relationship between supply and demand determines price changes .
Now we infer from the data on the chain that the potential selling pressure in the market is not high, that is, the supply is not high; then what will the market demand for Bitcoin in the future?
Some people may say that in the long run, the rolling wheels of the cryptocurrency industry are inevitable. The industry is still in its early stages and the future demand will be infinite. However, we currently limit the discussion time period to the next 2 years, which may be more reasonable. So where will the demand for Bitcoin in the next two years break out? Spot ETF? More companies enter the market? Or is the demand for capital outflows reduced due to factors such as interest rate hikes? In view of the subject relationship, we will not discuss the point of demand. This is only used as a fuse to try to trigger thinking.
Of course, we can change the angle to observe the net change dynamics of long-term holders’ currency holdings:
In the near future, the number of long-term holders of currency has changed from a net increase to a net decrease, and the price of Bitcoin during the same period also showed a downward trend.
In the past, the reduction of long-term holders’ currency holdings was due to the fact that the market had a large amount of buyer demand, which promoted the skyrocketing market and completed the shipment stop profit.
However, long-term holders are still likely to sell to profit in the case of insufficient market buyer power. Just because such a case has not yet appeared in the historical cycle does not mean that such a situation will not happen.
Exchange Bitcoin balance
In addition to the firm holdings of long-term bitcoin holders, the declining bitcoin balance of exchanges is also one of the confidence of bitcoin bulls in a firm bull market structure.
Since the exchange market structure has not yet taken shape before 2018, and infrastructure such as exchanges is under construction, the previous data is not yet of reference significance. Regardless of the cycle, the exchange balance has been rising.
However, the overall upward trend of exchange balances began to reverse in April 2020 and entered a gradual downward trend. Behind it is the rise of the “withdrawal movement”, the awakening of “Not Your KEY, Not Your Coins”, the long-termism of Hodler and the running into the field of later institutions.
However, this declining trend of Bitcoin balances on exchanges was reversed in mid-April this year, and it was accompanied by a cut in the price of Bitcoin. Perhaps the batch of bitcoins that flowed into the exchange was the culprit behind the cut.
Since centralized exchanges are still the main place for bitcoin transactions, monitoring the exchange’s bitcoin balance dynamics is a good reference for future market trends.
From the above figure, we can understand that the current exchange bitcoin balance is still declining, and there is no sign of any delay. This is one of the reasons why the Bitcoin bulls firmly believe that the current structure is a bull market.
Therefore, we can assist in a short-term market prediction by observing the net change of the exchange’s bitcoin balance:
The current Bitcoin balance of exchanges still shows a substantial net outflow, and there is even no sign of convergence, which undoubtedly strengthens the bullish sentiment of the analysts on the chain.
Brainstorming: Possible future market evolution
Independent market segmentation
Above we explained the reason why the on-chain analysts firmly believe that the market is in the bull market stage. It seems that we have already acquiesced that Bitcoin is the weather vane of the market as a whole, and the Bitcoin bull market is the cryptocurrency bull market.
But what about the other way around?
Bitcoin bears, will all sectors fall into silence?
Maybe now we have the confidence to say not necessarily. Of course, in a short-term or partial time frame, the market trend of sub-sectors will be affected by the Bitcoin market, but the hot sector will eventually go out of its own independent market.
In the past year, we have witnessed the rise of many sub-sectors, including NFT, New Public Chain, GameFi, Metaverse and even the recent Web3.0.
In the context of relatively complete infrastructure, the playability of the industry will rapidly improve, and the possibility of various sub-sectors going out of independent market will become higher and higher.
Bitcoin cycle boundary blur & volatility convergence
In the past, the boundary of each bull-bear conversion seems to be very clear, and volatility is also popular, but can we expect this to happen in the future? And the time span & boundary are still so clear?
Bitcoin is now a trillion-dollar asset, and it has gradually become one of the asset allocations of high-net-worth individuals and corporate institutions.
The user portraits of Bitcoin holders today should be very different from the user portraits of Bitcoin holders 4 years ago.
In other words, the market will still reproduce panic selling like 312 & 519, but the overall retracement will be more limited, and it can quickly recover. As the market value of Bitcoin rises to the next level, price volatility will gradually converge.
In the above, we learned from the perspective of on-chain analysts that a large number of circulating bitcoins are currently held in the hands of long-term hodler. In addition, the exchange’s bitcoin balance continues to decline and there has not yet been a net inflow. We understand that the on-chain analysts are determined to see more s reason.
At the same time, it also tries to stand on the opposite of the optimism of the on-chain analysts, assuming that even if the market is bearish, combined with the current development status of the industry, thanks to the relative maturity and perfection of the industry, the overall volatility of the market will converge. With more and more development and progress and independent market, the cold winter of the market may not be as lifeless as the historical cycle.
Perhaps the bull market will be longer; the bear market will not be so terrible anymore!
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/what-is-the-outlook-for-bitcoin-lets-take-a-look-at-the-data-on-the-chain/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.