Bitcoin On-Chain Data Suggests Price Is Top Heavy, What It Means
August 22 2023 - 2:34AM
NEWSBTC
After the Bitcoin price crash last week, on-chain data reveals a
picture that points to a “top-heavy” price. Glassnode’s latest
insights shed light on the current market dynamics, where a
significant chunk of the BTC spot supply finds itself with a cost
basis either near or surpassing the prevailing price. “Here we see
that 12.8% (2.48M BTC) of the supply fell into an unrealized loss
this week, setting a lower low on this metric. This suggests that
‘top heaviness’ in spot markets may also be a factor in play,”
commented Checkmate, Glassnode’s chief analyst. Notably, Long-Term
Holders (LTHs) have displayed remarkable resilience in this
turbulent period. Their interaction with exchanges remains largely
unaltered, with the aggregate balance of LTHs marking a new
All-Time High (ATH) this week. In stark contrast, the behavior of
Short-Term Holders (STHs) emerges as particularly salient. Related
Reading: Glassnode Co-Founder’s Prediction: DXY Set To Peak,
Fueling Potential Bitcoin Rally To $37,000 Checkmate notes, “With
LTH supply at ATH, we can also see that STH supply remains at
multi-year lows.” The data further underscores this: out of the
2.56M BTC held by STHs, a mere 300k BTC (11.7%) remains in profit,
meaning that 88.3% are in loss. This needs to recover quickly, else
it adds to the bear case, according to Checkmate. Historical data
indicates sharp upticks in STH supply losses following periods
characterized as ‘top heavy markets’ – similar to the events
observed in May 2021, December 2021, and once again, the last week.
Implications For Bitcoin Price The fluctuating dynamics between
profits and losses witnessed in the market can be further distilled
through the Profit or Loss Bias (dominance) metric. As the 2023
rally unfolded, a discernible shift was noted in the STH cohort’s
position: “This week we saw the largest loss dominance reading
since the March sell-off to $19.8k. This suggests that the STH
cohort are both largely underwater on their holdings, and
increasingly price sensitive,” added Checkmate. An intriguing
revelation comes from Glassnode’s experimental tool aimed at
discerning market inflection points. With a meticulous design that
maps macro trends of investors and the prevalence of profitability
over losses (and vice versa), this tool offers a nuanced ‘Momentum
indicator’. According to Checkmate, “We can see that after several
months of declining profit dominance, Loss momentum and dominance
have increased meaningfully.” Notably, while false positives have
been recorded – as observed in the March 2023 correction –
sustained declines have historically been precursors to sharper
downtrends. Related Reading: Bitcoin Reaches Most “Oversold” Record
Since 2020: What This Means Overall, the Bitcoin price crash on
August 17 stands as the most significant single-day decline YTD.
The sell-off was primarily a futures market leverage flush out, and
is thus primarily a result of short-term positioning and market
structure. However, the predominant sentiment is one of caution,
largely because the most significant impact has been technical,
specifically falling below long-term moving averages, a factor that
could sway market sentiment. Long-Term Holders remain stoic, but
the spotlight is on the Short-Term Holders. With an overwhelming
88.3% (equivalent to 2.26M BTC) of their supply at an unrealized
loss, combined with an uptick in realized losses sent to exchanges
and a breach of key technical support, the onus is on the bulls to
defend their stance. Checkmate concludes: There is for sure
potential for further downside momentum, but the majority of the
damage is positioning and technical. The bull case is that
realistically nothing has changed aside from the price, and the R/R
still favors the upside. Calls for 12k are kidding themselves, but
calls for 100K are as well. Net Result == same as every pre-halving
year ever. At press time, the Bitcoin price stood at $26,084.
Featured image from iStock, chart from TradingView.com
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