TitanSwap Monthly Report February
Due to the recent outbreak of armed conflict between Russia and Ukraine, the global markets have been experiencing a very calm period. Not only is BTC a global asset, but it also has a unique market that can be traded 24 hours a day, 7 days a week, and its price fluctuates quite strongly in response.
The conviction of many BTC investors has been significantly challenged, mainly those who bought near the highest point of the cryptocurrency. Buyers who bought at the top of the cryptocurrency price have now almost completely capitulated. Yet looking at the distribution of BTC holders who have remained, this group appears to have a much higher level of commitment, arguably reflecting the unwavering conviction of the last buyers.
The distribution of BTC was skewed towards top-heavy between May and July, with a large portion of BTC supply priced between $54,000 and $60,000. While this suggests a degree of demand at higher prices, it also makes the market vulnerable and many “top of the crypto buyers” can be very sensitive to major price adjustments.
The final result presented a massive market capitulation. The spot and derivatives markets evaporated all market prosperity and the collapse of on-chain activity in the Bitcoin network was arguably the beginning of the current bear market.
During this 2.5-month consolidation period, a large amount of spot was moved to exchanges for sale by top buyers. This supply was then gradually absorbed by buyers holding higher convictions, which added to the cost base of Bitcoin in the $29,000 to $40,000 price range. This behavior reflects a massive redistribution event from weak players to strong players.
Strong players keep holding
The “illiquid supply” indicator, tracks the number of Bitcoins held in wallets with little to no selling history. These typically represent cold wallets and coin hoarding parties’ wallets. And illiquid supply relative to circulating supply has now surpassed its peak in May 2021 at 76.3%. This metric has now returned to the same level as the 2017 market top, reversing a four-year-long trend of increasing Bitcoin wallet liquidity. However it is worth noting that both of these occurred prior to major sell-off events, so it remains to be seen whether these Bitcoins are actually being stored in cold wallets.
In a similar vein, the peak of realized market cap hoarding for coins older than 3 months is being pushed to a new local high of 72%. This means that 72% of the “dollar value stored in BTC” is in bitcoins older than 3 months. This is a typical bear market. Long-term investors are seeing the value and slowing their selling. But most of this recent rise has been driven by bitcoins in the 3-month — 6-month-old range, with the bottom in orange. These are bitcoins that are approaching or are crossing the 155-day (~5 months) short to long-term holder boundary.
The market is currently very interesting, both from a chain and macro perspective. Caution must be exercised given the huge uncertainty and risk associated with the clash of dynamics, with further de-risking, investor panic, and capitulation events expected. So far, however, there have been no widespread capitulation events beyond those who bought at the historical peak, and those short-term purchasers who bottomed too early during this decline.
Despite the very uncertain macro and geopolitical backdrop that is still in place, the behavior of Bitcoin HODLers still maintains a distinctly bullish belief. Investors continue to raise Bitcoins from exchanges into increasingly liquid wallets and these are growing at a very high rate into higher holding ages. The key now is to see if these coherent trends begin to reverse. While this may herald a widespread loss of confidence, however, in the event of such a reversal, these observations will continue to paint a favorable and constructive future for Bitcoin.
Creating an ecologically open and friendly environment is the only way to continue to attract external developers. All of this is contingent on its complete scalability. Opening up the interface and releasing some rights is a good way to benefit the whole ecosystem and the community, provided that TITAN is stable and healthy. We hope to attract more “friends from outside” to join our team and bring more interesting ideas and valuable extensions.