Market Overview
At the end of January in the new year, the Bitcoin price finally rebounded from a multi-month low. After three months of a continuous downtrend, the Bitcoin market has seen a surge in gains, with prices stabilizing above the psychological $40,000 level. In the context of numerous macro and market resistances, is this the bottom, or is it just a partial bottom before a longer-term bear market?
Fundamental Support
The $30,000 to $40,000 price range is a solid support level for the Bitcoin bull run. In 2021, this range has been defended a number of times; after a 50%+ decline in May-July, a correction in September, and again in January-February of this year.
Whereas the URPD indicator shows the current distribution of sell prices for the Bitcoin UTXO set. In the indicator, we can find that 2.351 million BTC (12.41% of the supply) was last traded between $36,200 and $41,200. Even with these Bitcoins resold at lower realizable values, the market remains top-heavy, with over 25% of the circulating supply ending up trading at higher prices.
As the market moves higher, one mechanism driving it may be a short squeeze on late-entry shorts, as shown by the long liquidation ratio chart. This has been in an unfavorable state this week, slightly gaining the upper hand on the short liquidation trend. However, the magnitude of this indicator remains fairly anemic, suggesting that price gains are unlikely to be driven primarily by a short squeeze.
To a large extent, the 1-day change in futures open interest confirms this speculation. We have yet to see the typical characteristics of a deleveraging event, where large volumes of open interest are liquidated. However, futures open interest is still high at around 1.91% of Bitcoin’s market cap (~$15 billion). This could indicate a lower probability of a short break than initially estimated, or that such an event could still occur if the market continues to move higher, reaching a cluster of short stop/liquidation levels.
Short-term Momentum Up
From late November to the present, Short Term Holders (STH) had their first profitable day, with STH-SOPR breaking 1.0. This shows that the bitcoins sold this week, as well as bitcoins less than 155 days old, are generally profitable. For more than two months prior to this, STHs who bought at the peak of the market sold their bitcoin at lower prices, and they realized losses on a daily basis.
Since March 2020, we can see a similar STH-SOPR pattern in two instances. After a long period of losses, the market managed to break out of a bullish uptrend with the STH-SOPR indicator retesting 1.0. If the STH-SOPR indicator breaks higher again, it indicates that profits are regained, and demand starts to flow back in and buy Bitcoin. Conversely, a move back below 1.0 would be a bearish indicator and suggest that there is still not enough demand to support selling pressure on STH.
About the 2016 Bitfinex Hacked Wallet
Recently, some on-chain metrics detected a very large sell-off of 94,643 bitcoins associated with the wallets of the 2016 Bitfinex hack with a market cap of $3.67 billion. Considering the sheer scale in terms of coin volume, dollar value, realized profits, and longevity of destruction, this becomes an interesting case to assess how on-chain anomalies affect the interpretation of the metrics.
It can be seen that in the recovery supply of coins with an age of more than 5 years, this sale is the largest sale of coins with an age of more than 5 years in Bitcoin’s history, surpassing the 71,825 coins sold in January 2019 when the price was $3629. BTC days burned also surged to multi-year highs, with a total of 195 million BTC days burned, of which 190 million (97%) were related to Bitfinex wallets.
A declining vitality indicator shows that there are more bitcoins in the entire bitcoin supply that are dormant and currently accumulating lifespans (coin days) than there are those that are being sold, destroying Coin days. This is a typical hoarder accumulation period, often synonymous with a bear market.
TITAN Delivery
As the market becomes more competitive, our team is working tirelessly to improve our platform and develop new and exclusive products and functionality to provide the best user experience among Defi projects.
1. Accumulated user behavior data was analyzed.
2. Stability of the background operation of the system has been optimized.
