Jan 5
Bitcoin On-сhain: Summary 2022 (№72)
It was a tough year for the crypto industry. The price of Bitcoin has dropped from $46,311 to $16,700 (- 63.9%) and Bitcoin Volume has decreased from $24.46B per day to $16.66B per day (- 31.7%) from the 1 of January 2022. The major crypto companies that have gone bankrupt in 2022. The collapse of the FTX exchange in November was the most shocking bankruptcy of a custodian in history, leaving millions of customers without funds, destroying many years of industry reputation, and creating new credit risks. Nevertheless, it is important to remember that the digital asset space is a free market, and this event represents a failure of a centralized entity, not of the cryptographic technology. I believe that with a renewed focus on exchange Proof-of-Reserves, upcoming regulations, and switch to a self-custody, the market will recover and become stronger in the years ahead.
Executive summary:
- Realized profit / loss ratio has recorded a new all time low. Losses locked in by the market were 14x larger than profit taking events.
- Futures volumes are similarly depressed, BTC and ETH markets are currently trading similar volumes between $9.5B and $10.5B per day.
- Bitcoin Long-term Holder supply has pushed to yet another ATH.
- Bitcoin Whales are showing interest in dumping or accumulating Bitcoin, hitting 2-year low $1M+ transaction rates.
- Short-term realized volatility for BTC is currently at multi-year lows of 22% (1-week), and 28% (2-weeks), making for the lowest volatility regime since Oct 2020.
- Total stablecoin supply peaked at $161.5B in March 2022, however has since seen large scale redemptions exceeding $14.3B. This reflects a net capital outflows from the space of between -$4B and $-8B per month.
- Since the Ethereum Merge, the number of active validators has increased by 13.3%, with over 484k validators now operational. This brings the total ETH staked to 15.618M ETH, which is equivalent to 12.89% of the circulating supply.
- The total value locked in DeFi has dropped by over $120.3B (-75%). This brings DeFi collateral values down to $39.7B, returning to Feb 2021 levels.
In the end of 2021 over $455 Billion in profits were taken by Bitcoin investors moving funds on-chain. Since then, a bear market regime has dominated, and the market has given back over $213 Billion in realized losses. This equates to 46.8% of the 2020–21 bull profits, which is very similar in relative magnitude to the 2018 bear, where the market gave back 47.9%.
The ratio between realized profit / loss has recorded a new all time low. This indicates that losses locked in by the market were 14x larger than profit taking events. It is likely this in part reflects how the entirety of the 2020–22 cycle price action is above the spot price.
Exchange Whale Ratio in 72 MA shows that selling power from whales have been weakened since Q3 of 2022 until the present. A similar pattern has happened between late 2018 and early 2019 so they might intend to wait for a relief rally.
At the same time, whales are showing interest in dumping or accumulating Bitcoin, hitting 2-year low $1M+ transaction rates.
Long-Term Holder Supply has completely reverted the panic spending after the FTX collapse, hitting a new ATH of 13.908M BTC (72.3% of circulating supply).
Both BTC and ETH markets are currently trading similar volumes between $9.5B and $10.5B per day. This shows the massive impact of tightening liquidity and the impairment of many lending and trading desks in the space.
Short-term realized volatility for BTC is currently at multi-year lows of 22% (1-week), and 28% (2-weeks), making for the lowest volatility regime since Oct 2020.
Difficulty declined by 7.32%, signifying a reasonably large portion of the active hashrate was switched off, likely a result of continued income stress.
The hash-ribbons have inverted once again. There is sufficient stress in the mining industry that some operators are taking ASIC rigs offline. This is typically associated with the miners income stream falling below their OPEX expense, making the rigs unprofitable.
Since the Ethereum Merge, the number of active validators has increased by 13.3%, with over 484k validators now operational. This brings the total ETH staked to 15.618M ETH, which is equivalent to 12.89% of the circulating supply.
The total value locked in DeFi has dropped by over $120.3B (-75%). This brings DeFi collateral values down to $39.7B, returning to Feb 2021 levels.
Total stablecoin supply peaked at $161.5B in March 2022, however has since seen large scale redemptions exceeding $14.3B. This reflects a net capital outflows from the space of between -$4B and $-8B per month.
This year investors have experienced fear over 70% of days. The peak value was 60, and the lowest number has achieved 6. Nevertheless, experienced investors know that the crypto market behaviour is very emotional. Also, people often sell their coins in irrational reaction of seeing red numbers giving an amazing buying opportunity for rational investors.
Sources: https://studio.glassnode.com/metrics?, https://cryptoquant.com https://www.tradingview.com/, https://coinmarketcap.com, https://alternative.me/crypto/fear-and-greed-index/
