In an analysis of the bitcoin (BTC) market during the week of July 25 to July 31, the analytical firm Glassnode recorded a record flow of BTC from exchanges, comparable to that of November 2020. A price action On the rise characterized the week, which allowed the cryptocurrency to exceed USD 42,000 on Friday, July 30.
Among other aspects analyzed in the Week On-chain # 31 report, the magnitude of the taking of profits and how the behavior of accumulation and spending in chain was manifested in that week.
The following graph shows the monthly rate of the BTC entering the exchanges (in green) or coming out of these (in red). In the mentioned week there was a record outgoing flow of BTC, comparable to the maximum outgoing flows of eight months ago.
The rate of the outgoing flow of BTC last week reached 100,000 BTC, as appreciated.
In terms of the aggregate bitcoin balance still held on exchanges, Inventories have now returned to 2021 lows of 13.2% of circulating supply , Glassnode notes. “This represents an almost total decline in the significant inbound volume observed during the May sell-off,” he adds.
Profit taking or a rally of disbelief?
After an extended period in which negative market sentiment dominated , the study raises the question of how to rate last week’s bull boom . It could be a “rally of disbelief” where everyone doubts the new uptrend, or a rally of bearish relief in a longer time frame, says the report.
To begin the evaluation, the authors consider the gains and losses that occurred in the chain.
«We can see that after a long period of high losses that took place from May to July (pink), this week more than USD were obtained 2 billion in profits in the chain (median of 7 days) “, says the report. The conclusion is that there is a part of the market that spent its coins in profit, which allowed it to take liquidity
Currencies return to profitability
With the market down since mid-April, most of the sales made have reflected losses, especially after May, says the report . Using the Expenditure Profit Ratio (SOPR) metric, it is possible to get a view of the market gains or losses. This same adjusted metric (aSOPR), ignores coins of less than 1 hour, according to the report.
After a capitulation process brought the price of bitcoin to USD 29,000 , in the last week of July there was a rebound higher than USD 42,000. It is called ‘capitulation’ to the massive sales of BTC by the miners when the activity stops being profitable.
is reactivated the cycle of young coins
The so-called realized capital waves, filtered for young currencies (Eventually, the market cannot absorb more supply and turns into a bear market, the authors state.
«As the speculators leave and smart money accumulates, the population of young coins decreases as more of these are transferred to cold storage “, the study maintains.
In the penultimate phase of this cycle, supply of young coins collapses after a capitulation event , and massive accumulation takes hold. Very often, When the market recovers from this capitulation fund, a bull market begins. “Older coins are spent in the rally to obtain exit liquidity, again increasing the supply of young coins,” says the report.
This week, there was a notable increase in these younger coins coming from what looks like a capitulation fund , or the old coins just sold, assures the study. In a bullish scenario, this trend would decrease, if HODLing or retention dominates, the authors point out. Also the price could continue higher despite this, Glassnode points out (disbelief, absorbing the sell side).
Flow of bitcoin from miners to exchanges
Side of sales, miners must also be considered, the report says. Approximately half of the miners were taken offline due to the Chinese government’s restrictions on that industry, and the net volume of transfers to exchanges hit lows of 100 BTC per day , from mid to late July, say the authors.
However, last week, a transfer level of 300 BTC a day was reached, according to Glassnode. “This reflects the resilience of the bitcoin mining market. Half of the miners can increase the selling pressure out of necessity, while the other half can accumulate bitcoin at double the rate, ”say the authors.
The price of bitcoin on July 25 last week it was USD 34,282, and it closed last week at USD 41,482, which represented an appreciation of 21%. Between July 21 and 30, there were ten consecutive days on the rise, which represented a boom of 42%, and a maximum in July of USD 42,236, as reported by CriptoNoticias, its best performance in ten weeks.
