Home CryptoCurrency

Glassnode shows in charts the keys of the bullish cycle of bitcoin

In newsletter # 3 Bitcoin Uncharted , analytics firm Glassnode co-founders Jan Happel and Yann Allemann continue to offer revealing details of bitcoin (BTC) and the world of cryptocurrencies through interesting graphs that are related to the evolution of the current bullish cycle of bitcoin.

In this third installment, the engineers address from what they call Elon Musk’s “shock waves” in the cryptocurrency market, to the open interest in bitcoin futures, along with the accumulation of bitcoin, and the incorporation of new bitcoin users, among many other topics. The graphs are compiled twice a month and are presented individually, before the newsletter is published, on the Twitter account of Yann & Jan, @Negentropic _.

Tracking Bitcoin celebrities

The first Bitcoin Uncharted chart is dedicated to Elon Musk. The authors show the visits of CoinMarketCap, Coinbase and Binance in the last four months . They note that Musk “has sent massive shockwaves into the crypto-sphere, as a consequence we have seen a strong resurgence of interest from retail investors in that space,” the document says.

The graph shows the impact of Elon Musk’s views on the growth of retail investors. Source: Bitcoin Uncharted.

Until the end of January, as shown in the chart above, there were an average of 2-3 million active users on CoinMarketCap and two of the most popular exchanges. At the beginning of February, indicated with the red dotted line, that average rose to a number of users that ranged between 4 and 5 million daily visitors.

As published by CriptoNoticias, Elon Musk made several pronouncements in February in favor of the cryptocurrency Doge, and contributed to a notorious rise in the price of bitcoin, announcing on the 8th of that month a Tesla investment of $ 1.5 billion. This brought the first cryptocurrency to a new all-time high.

On the other hand, the newsletter shows the increase in followers on Twitter from analyst Willy Woo (@woonomic) and investor Anthony Pompliano (@Pomp), a trend that also indicates an influx of new retail investors attracted to Bitcoin last week.

New Twitter followers of @ woonomic and @pomp. Source: Bitcoin Uncharted.

Capital turnover towards altcoins

The authors state that the so-called Altcoin / Bitcoin Cycle Index confirms the rotation of capital towards altcoins. It measures the relative performance of bitcoin compared to a wide selection of digital assets, says the report.

To summarize, bitcoin started the year with a consolidation between $ 30,000 and $ 35,000, allowing many altcoins to start a rally . This changed overnight with the increased attention Musk paid to bitcoin, pushing it above 40k within hours of Tesla’s bullish announcement. Since then, both bitcoin and altcoins have been on the rally, an indication that both institutional and retail money are flowing into this space.

Yann & Jan. Bitcoin Uncharted.

Phases of bitcoin accumulation

The authors state that the accumulation of bitcoin since the beginning of 2020 has been occurring in stages. From March to early December, the report states that there was a greater outflow of bitcoin from exchanges to institutional holders, indicating strong demand spot . “In 2021, these departures have begun to decrease,” says the report.

From April to December 2020, the departure of BTC from exchanges intensified. Source: Bitcoin Uncharted.

According to On the gradient scale, to the right of the previous graph, the portions marked with red circles reveal periods with high numbers of outgoing BTCs (yellow trend) from April-May to December 2020. Then there is a reduction in light tones towards dark tones (minus outgoing BTC) in 2021.

Demand spot institutional bitcoin

The cash demand of institutions seems to have stabilized in January, he says the report. However, it states that the total number of withdrawals from exchanges shows a significant rebound in recent days.

Withdrawals of BTC from exchanges. Source: Bitcoin Uncharted.

In the graphic Above, there is a notable single-day withdrawal boom, which is at the level of withdrawals during the later stages of the 2017 bull cycle, as indicated by the red segmented line. “This shows that other market participants are accumulating,” say the authors.

Reflection of Bitcoin futures rally

The demand for exposure leveraged through futures increased in January, after institutions reduced their purchases spot during the month of December, says the report. “This is a sign of an increased appetite for risk,” the authors state.

Both daily CME futures volume and open interest grew in January 2021. Source: Bitcoin Uncharted.

This increase in demand is supported by the growth of new participants in the network, as can be seen in the following graph.

Currently, the The report notes that open interest on all exchanges is at an all-time high, just over $ 16 billion in total value. This represents an increase of 60% from January 1st.

rate. Source: Bitcoin Uncharted.

Analysis of the bullish cycle of bitcoin

Once the above results are presented, the authors ask themselves «Is this the best for bitcoin or just the beginning?

To understand that, let’s take a step back and analyze the bull cycle of bitcoin as a whole. As mentioned in previous newsletters, bitcoin’s macro bull cycle begins with a reduction in supply on exchanges, leading to a drastic reduction in supply.

Yann & Jan. Bitcoin Uncharted.

In the areas highlighted in green in the previous graph, a decrease in the BTC inventory is noted. At present, it is seen that the current decline has lasted more than double what it lasted in 2017.

The BTC supply restriction, created by the accumulation of long-term holders, results in an increase in price, the document says. “This, in turn, attracts retailers and other types of short-term holders who also start buying.”

The highlighted area in the graph shows the boom in investors retailers. Source: Bitcoin Uncharted.

“One time that short-term holders have accumulated a certain amount of available BTC, they start to become a major market driver, affecting short-term price cycles. These short-term forks are much more price elastic, and therefore respond faster to changes in the price of bitcoin, than long-term forks, the authors state.

In the graphic above compares the supply of BTC in the hands of long-term holders (blue) with the supply in the hands of short-term holders (gold).

The authors note the importance of keeping track of supply that is generating profit for short-term holders, as any change in price above a certain magnitude can lead to a massive sell-off in short-term. «This effect becomes extreme in the later stages of the bull market, as short-term holders become increasingly sensitive to movements of prices. ”

The gold line in the graph below represents the supply of BTC reflecting earnings, held by short-term holders.

The maximum profit has not yet been reached in the current bull cycle of BTC. Source: Bitcoin Uncharted.

Once the price rises to a certain level, the document notes, new and old players begin to increase the number of BTC deposits to exchanges. This, in order to capture profits or speculate on price discovery. «By comparing our cycle current with the last bull run of 2017, it is clear that we are still in that initial phase of acceleration of the curve. ”

The authors warn that it is important to normalize the number of directions of deposit to the total number of addresses on the network, which increased about 3 times since 2017. “Therefore, the current number of addresses in the graph below must be divided by 3 to make a valid comparison with the previous bull rally.”

«We did not reach the end until the number of addresses they are depositing in the exchanges is exponential. “

In the current cycle the upload has not yet occurred exponential deposits and exchanges. Source: Bitcoin Uncharted.

The authors highlight that the acceleration of the flow of incoming BTC to the exchanges, on the part of the short-term holders, coincides with the fact that many of these are in profit. “Your increased urge to send coins to exchanges begins to increase network transfer fees.”

In historical terms We are currently in the midst of a supply transition from long-term holders to short-term holders, the report says. “This transition, although faster than in 2017, is a strong sign that we have come out of the initial accumulation phase.”

The accumulation phase by long-term holders would be culminating. Source: Bitcoin Uncharted.

The output of BTC from exchanges to cold wallets of long-term holders would be ending. As supply continues to flow to short-term holders, the price hike of this cycle would be completed.

A recent prediction from analyst Willy Woo, commented on Sunday 14 February by CriptoNoticias, coincides with this analysis regarding the arrival of large numbers of retail investors to various investment plans in bitcoin.


Leave a Reply Cancel reply

Exit mobile version