Chain Gang 8/1

Adam Gotelli
4 min readAug 1, 2021

This week Bitcoin finally saw some price action that was consistent with the overall on-chain metrics. For several months, on-chain metrics had been showing massive amounts of accumulation from long-term holders, but it was not reflected in the price of BTC. At the time of writing, price is at over 41k and even reached levels well above 42k in recent days. We don't always dive into technical analysis, but there was recent action that can't be ignored. Between July 21-July 30 BTC closed the day with 10 consecutive green candles. This means that the opening day price was lower than the closing price. This hadn't taken place since October 6, 2013. BTC saw a roughly 10x price run-up by the end of November 2013 the last time this happened. Although the price of Bitcoin saw a significant rise this week, on-chain metrics show that price still has not mirrored bullish sentiment.

It’s clear that a short squeeze really sparked this recent mini-rally. Last Sunday, over $110 million in shorts were liquidated within minutes. This means that traders were expecting BTC’s price to hit lower levels by that date, and were “squeezed” out. As we can see, price rose by around 2k in roughly 15 minutes as a result.

The liquid supply ratio saw another strong uptick this past week. This means that short-term holders were selling their coins to long-term holders at an even faster pace. The ratio is starting to approach levels that we saw at the last ATH.

As a general rule of thumb, when BTC is moved onto exchanges, it is a bearish signal. This means that large holders most likely are doing so in order to sell their BTC. On the other hand, when BTC is moved off of exchanges, long-term holders are bullishly stacking and do not plan on selling anytime soon. This week we saw a massive drop of BTC on exchanges of nearly 70,000 BTC. Similar movement from this metric was also seen before the last ATH.

As mentioned in previous weeks, BTC buyers either end up selling their BTC at a profit or loss. The net realized profit of BTC holders spiked back up to positive levels this past week. Sellers saw roughly $2.4 billion in profits over the past week.

When looking at net realized profits, we should consider the average age of the coins being sold. Over the past week, we saw the age of coins being sold drop. This may mean that traders bought in around the 30k range earlier in the week, and ended up selling as we approached 40k. It can be assumed that these are not long-term holders in a general sense.

Another steady indicator of market sentiment can be seen through the balances of Bitcoin miners. This week continued the trend of miners buying up, and holding onto BTC after they mined it.

Lastly, the S2F (stock-to-flow) model is starting to see glimmers of hope. It is conceivable that ATHs can be reached within the next month or two. This would not put Bitcoin far off from the end-of-year price predictions the model has. Although there is still a strong divergence in price in comparison to the model, there has been a visibly significant bounce on the chart.

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