Bitcoin price is fragile, but on-chain data points to new accumulation


The sell-off of the crypto market on May 19 evaporated the total market value of US$1.2 trillion, as the bubble and excessive leverage of the excessive speculation in the market were quickly eliminated.

But similar to forest fires, its destructive power is vital to the restoration of forest ecosystems. The severe market turbulence is an important part of the entire life cycle of developing markets, because the accumulated surplus is laying the foundation for a new round of growth.

According to the data from Glass nodeLast month, there was a “historical sharp drop in on-chain activity”, “the rapid transition from a prosperous on-chain economy at ATH prices to an almost completely emptied memory pool and weakened demand for transactions and settlements.”

This clearing of congestion helps solve Ethereum (Ethereum) And Bitcoin (Bitcoin) After the short-term surge of US$60 in April and May, the network has now “recovered to the mid-2020 level of US$3.50 to US$4.50”. However, given the lingering price trends of BTC and Ether, the transaction Members also worry about whether the market turns from bullish to bearish.

The average transaction cost of Bitcoin and Ether. source: Glass node

The decrease in activity led to a 65% drop in the total USD-denominated transfers settled on the Bitcoin network, and a 60% drop in the value of transfers on Ethereum, which was the second largest decline after Bitcoin’s 80% drop in 2017 and 2018. Down 95%.

Long-term holder accumulation

Although on-chain activity paints a grim picture for some people, because short-term holders have been hit hardest by the economic downturn, but a closer look will reveal that long-term holders (LTH) have begun to increase their holdings again, which shows that the most The shock of the bad situation may have passed.

Changes in long-term holders’ net positions. source: Glass node

As shown in the figure above, as the price rose from US$10,000 to US$64,000, the supply held by long-term BTC holders began to accelerate. This rising figure indicates that “LTH supply is now on a solid upward trend”, similar to the trend during the “bullish market at the end of 2017 and the bear market at the beginning of 2018”.

Glassnode says:

“This fractal describes the inflection point where LTH stopped spending, began to re-accumulate and hold what is now considered a cheap token.”

The number of BTC currently held by LTH has increased by 2.3 million from the 2017 peak, which shows that the long-term view of these token holders is that the market is going higher.

Observing the changes in BTC’s liquidity and illiquid supply in the past 6 months, we can find the last sign that the market may be consolidating in preparation for the next move higher.

Bitcoin liquidity and high liquidity supply. source: Glass node

As shown in the figure above, in May, 160,700 BTC re-entered the circulation from the illiquid state, accounting for only 22% of the total supply that changed from the illiquid state to the illiquid state since March 2020.

This means that 78% of the BTC obtained since then remains unused, indicating that the overall outlook for long-term holders is optimistic.

Although due to factors such as unpredictable volatility, unstable tweets by influencers, and rumors of unexpected government crackdowns, it is impossible to determine the next move of the cryptocurrency market, but the data on the chain shows that the long-term prospects are optimistic. Once the current shock period and consolidation period Fading gradually.

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