Chain Gang 6/13

Adam Gotelli
4 min readJun 13, 2021

The price of BTC was moving sideways for the majority of the week. Support was 32k, while resistance remained around 40k. There was a slight break under the 32k support, which was unexpectedly followed by a strong mini-rally. Generally speaking, when support is breached, a strong drawdown is expected (many traders called for 25k in this case). This week’s good news seemed to push the price of BTC up slightly, while the FUD (Fear, Uncertainty, Doubt) seemed to have no impact on the price. In weeks prior, BTC was far more sensitive to both positive and negative reports. Now let’s take a look at the on-chain metrics.

When taking a look at the SOPR (Spent Output Profit Ratio) index, if the chart is over 1, coins are trading at a profit, and under 1 means that coins are trading at a loss. This is in relation to when the coins were bought. If a trader sold at a profit, it appears above the 1 line. If they sold at a loss, it appears below the 1 line. There were two significant drawdowns on the chart below 1 that appear to have formed a new higher low. However, it did finish the week above the 1 level. A general sign of a bull market is characterized by support at the 1 level, as most holders will not want to sell at a loss during a bull market.

Up until this past week, the short-term holders had generally been outselling the long-term holders. This was a clear example of paper hands selling due to FUD while diamond hands saw the dip as an opportunity to accumulate more. Over this past week, that trend has slowed down, as supply from short-term holders has decreased. This means that there is not as much BTC for the long-term holders to buy as there was in the past. Some of this may be due to wallets maturing, as the threshold for a wallet to be considered long-term is 155 days.

The illiquid supply is characterized by long-term holders that have low selling behavior. From late May to early June, those wallets turned more liquid than they had all year (bearish sign). However, that small trend is heading back to the illiquid levels. It will be important to keep an eye on this metric, as a return to previous levels would be an extremely bullish sign.

BTC miners had been holding on to the coins that they received up until this week. Miners began selling more coins than usual at the beginning of this month. Particularly Chinese miners, after the bearish news on China “banning” the mining of BTC (as they have tried to do on numerous occasions).

One the of most interesting models, the stock-to-flow model, has seen the largest price deflection to the downside in the history of the model (bearish signal). Any lower price action and the model may be invalidated. However, the recent bullish price action may allow a rebound that will keep the price consistent with the model.

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