Chain Gang 8/27

Adam Gotelli
4 min readAug 28, 2021

Bitcoin had a relatively nonvolatile week in regards to price. Other than a short-lived draw down towards the end of the week, the “open” and “close” for the asset were nearly the same. BTC sits at 49k at the time of writing this article. We see that long-term holders now possess more BTC than ever. Furthermore, price growth towards the previous all-time highs continues to take place in a healthy manner. September has historically been a bearish month for cryptocurrencies, but there is plenty of institutional adoption taking place that may override any negative sentiment. I will continue to stress how important on-chain metrics are, and how no other system provides individuals with such transparency when it comes to an asset. These metrics are not 100% correlated to the price action of BTC, but there are countless indicators that can be referenced to gauge sentiment. The growth in this space over the next few years will be mind-blowing. I expect some of the smartest minds from all industries to fully embrace on-chain metrics.

As mentioned above, long-term holders now hold a record number of BTC. They are approaching 12.75 million coins. It can be noted that the total supply of these holders was decreasing while the price of BTC was approaching previous all-time highs. This will be an interesting metric to keep an eye on in the future. If price rises/stagnates while long-term holders decrease their supply, it may be an indicator of future bearish price action.

As many of you know, BTC’s maximum supply is 21 million. The last coins are set to be mined in 2140. Of the current circulating supply, long-term investors hold well over 2/3 of all coins. If you take into account lost coins or dormant coins, that number can be as high as 84.5%. Take a close look at the correlation between sharp drawdowns in this metric, and price action throughout BTC’s previous cycles.

As we’ve observed in previous weeks, market participants will either sell at a profit or loss based upon when they bought. When the majority of coins are selling at a profit, there is typically a bull run present. A large chunk of buying from individuals took place around the 45k range, which left them out of profit for some time. Since then, 86% of addresses are now in profit.

Next, we have our exchange flows that give a general idea of where the market is headed. When BTC has moved off exchanges, users generally have no plans of short-term selling. When it is moved onto exchanges, holders may be looking to take profits. One variable that cannot be seen in these charts is the effect of stable coins being held on exchanges. If accounts begin to load up on stable coins in their portfolios, they may be positioning themselves for large amounts of accumulation in the near future.

Fortunately for Bitcoin, the stock-to-flow model has not had a significant increase recently. This means that according to the model, price was not expected to rapidly increase during this time period. The model indicates a 100k price of Bitcoin around the end of the year. This does not seem too far-fetched at the moment even though price has not been consistent with the model for months at this point.

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