Cryptocurrency News

Bitcoin Price Fragile, But On-Chain Data Points to New Accumulation


The crypto market sell-off on May 19 wiped out $1.2 trillion in value from the total market capitalization as the foam and excess leverage of the over-hyped markets were quickly wiped out.

But similar to a wildfire, the destructive power of which is necessary to rejuvenate a forest’s ecosystem, dramatic market volatility is an important part of the full life cycle of a developing market, as accumulated excess is burned. and is cleaned. To set the stage for a new round of development.

according to the data of glassnode, the past month saw a “historically large drop” in on-chain activity, “a rapid transition from on-chain economies to booming ATH prices, an almost entirely clear mempool, and reduced demand for transactions and settlements.” ”

This clearing of congestion helped to address the rising cost of fees on both Ethereum (ETH) and bitcoin (B T c) networks that have now “returned to mid-2020 levels of around $3.50 to $4.50” after experiencing high short-term spikes of $60 in April and May but noticing sluggish price action from BTC and Ether, traders also Concerned whether the market is rapidly shifting to a bearish side.

Bitcoin vs Ether Average Transaction Fee. Source: glassnode

The decline in activity has resulted in a 65% drop in the total USD denominated transfer volume settled by the bitcoin network and a 60% decrease in the value transferred on Ethereum, which is behind an 80% drop for the network for bitcoin. The second biggest drop is A 95% drop for Ethereum in 2017 and 2018.

long-term holder deposits

While on-chain activity paints a grim picture for some, as short-term holders were the worst hit by the downturn, a closer look shows that long-term holders (LTH) have started to hoard again. is a sign that the worst-case concussion may have passed.

Change in the net position of the long-term holder. Source: glassnode

As seen in the chart above, the supply held by long-term BTC holders has begun an upward move after the distribution period as the price moved from $10,000 to $64,000. This rising figure indicates that “LTH supply is now in a strong uptrend,” and is similar to the trend seen during the “recession of late 2017 and early 2018”.

Glassnode said:

“This fractal describes the inflection point where LTH stops spending, starts hoarding again and is now considered a cheap coin.”

Further bullishness can be seen in the fact that the amount of BTC currently held by LTH is 2.3 million more than the 2017 peak, indicating that the long-term view of these token holders is that the market is at a higher level.

Given the change in liquid and liquid supply of BTC over the past 6 months, there is a final sign that the market may be consolidating in preparation for its next move.

Bitcoin is a liquid and highly liquid supply. Source: glassnode

As seen in the chart above, 160,700 BTC went from a liquid state back to liquid circulation in the month of May, which is just 22% of the total supply that has moved from liquid to liquid since March 2020.

This means that 78% of the BTC acquired since then has not been spent, indicating an overall positive outlook from long-term holders.

While it is impossible to be sure about the next steps for the cryptocurrency market, due to unexpected volatility, uncertain tweets from influential people and rumors of surprise government action, on-chain data points to a positive long-term outlook that is currently once again. should start with. Shake-out and consolidation periods are reduced.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk, and you should do your own research when making a decision.