Chain Gang 8/14

Adam Gotelli
3 min readAug 16, 2021

This week Bitcoin continued a steady climb in price at a healthy pace. This price appreciation came amidst a flash of negative news for the cryptocurrency space. The news is a result of the $1.2 trillion infrastructure bill that was passed by the Senate earlier in the week. The package contains a provision that implements tax codes that stifle growth in the cryptocurrency industry. The entire bill was stalled due to a proposed amendment that would better clarify the taxation reach of the government. Unfortunately, 1 out of the 99 Senators voted against the amendment. The Senator self proclaimed that he did so out of spite for not receiving billions of dollars for his donors in the bill. All the while, Bitcoin’s price continued to go up. Let’s take a look at what the on chain metrics have told us in relation to price.

This week we will start off with a new metric, which is the exchange supply shock ratio in relation to BTC’s price. As the price of Bitcoin has continued to go up, exchanges have had less BTC at their disposal to sell. As we have noted in weeks past, BTC moving onto exchanges means a likely selloff, and BTC moving off of exchanges is the result of the HODL mentality. This metric shows that BTC levels have decreased by nearly 110,000 over the past three weeks.

Another new metric deals with spent output age bands. This metric simply looks at the selling habits of all coins that have been held for longer than 6 months. These coins would be considered fairly illiquid, as the holders would only part with their coins during large market selloffs. As we can see, during the end of the previous cycle there was a giant spike of selling that came from illiquid holders. This signaled/played a part in the end of that cycle. Currently, the sellling habits of these holders are nowhere near those previous highs, and it does not look like long-term holders are planning to sell anytime soon.

With another look at the spent output profit ratio SOPR, we can see that bitcoin wallets are still selling at a profit. This is another way to see that entities are selling their BTC for more than they bought it at.

There was a significant spike in miner accumulation over the past week. Once again bullish sentiment from the most bullish people in the space. These miners have had the luxury of enjoying record low difficulty adjustments for mining while China miners are migrating elsehwere.

The Stock-to-Flow model currently calls for a price of 107.5k, while the actual price of BTC at the time of writing is around 47.5k. This is not to say that the model is completely invalidated. If prices reach the 63k range by the month of October, there may be a strong price rip to the upside.

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