Research has detailed Bitcoin’s recent record volatility and while traders expect an eventual price breakout, BTC’s Oct. 26 price move to $21,000 is yet to be interpreted as confirmation that $20,000 has now become in support.
In a recent “The Week On-chain Newsletter,” Glassnode analysts plotted a bull case and a bear case for BTC.
According to the report, the bear case includes limited on-chain transaction activity, stagnant growth in non-zero addresses, and reduced profits from miners who present a strong risk of Bitcoin liquidation, but the data also shows that long-term hodlers are more determined than ever to ride out the current bear market.
The bull case, on the other hand, involves an increase in whale holdings, exit from centralized exchanges, and hoarding by longer-term investors.
Stagnant new address growth
The growth of active on-chain addresses remains stagnant on the BTC network. A reduction in transactions translates into a decrease in the use and growth of users of the network, factors that could possibly hinder the expansion of the price of BTC.
New addresses within the Bitcoin ecosystem that possess a non-zero address have also plateaued, a trend that also occurred in November 2018. Stagnant growth in new non-zero addresses in 2018 was followed by a drop in the price of BTC and did not recover until January 2019 when this metric started to rise.
The sale of miners could trigger a new liquidation
In previous years, many BTC miners held large amounts of BTC in their reserves. However, since the start of the bear market, many miners are selling BTC to cover their capital costs and operating expenses.
With BTC mining production costs rising against a backdrop of falling revenue, miners are deleveraging by selling their newly mined BTC. Glassnode warned that the current:
“Miner deleveraging events may lead to reduced order book spreads, historically low demand, and persistent macroeconomic uncertainty and liquidity constraints.”
As the price of BTC falls and miners’ profitability declines, miners may be forced to liquidate more of their Bitcoin holdings.
The whales accumulate
Despite the drop in BTC prices, many BTC whales holding excess 10,000 BTC are possibly increasing their holdings even in bear market conditions. As shown in the chart below, they continue to accumulate BTC after being distributed in April and September.
BTC Withdrawals From Centralized Exchanges Could Reduce Selling Pressure
Funds moved from centralized exchanges weaken immediate selling pressure in the market. Coinbase, one of the highest volume centralized exchanges, is experiencing large BTC withdrawals. Comparing Coinbase’s current BTC outflow to the post-March 2020 peak on the exchange, more than 48% of total BTC was transferred on the exchange.
Glassnode notes that:
“Coinbase has seen a large scale net outflow of -41,600 BTC this week… It is important to note that these outflows are based on our best estimated wallet pools, and appear to be a mix of coins flowing into both investors, wallets and/or institutional grade custody solutions”.
The hodlers keep hodling
According to the Realized Cap HODL Waves metric, total USD wealth held in BTC, valued at the time of each coin’s last transaction, is now disproportionately skewed towards longer-term holders. The proportion of wealth held in currencies that moved in the last 3 months is now at an all-time low. The reciprocal observation is that wealth held by coins older than 3 months (increasingly held by Hodlers) is now at an all time high.
While some Bitcoin analysts believe that the low volatility of BTC during this period is “a calm before the storm” and the current price and macroeconomic surge of BTC may show the determination of hodlers as the winning factor.
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