On-сhain Weekly Report №69 (Week 29 2022)

Bitcoin and other digital assets have already experienced one of the deepest and fastest bear movements in their history. Prices traded down -38% over the last 30-days, similar only with the 2011 bear market. The main reason for the downward event was the US CPI inflation hit a new high of 9.1%. Moreover, energy prices have significantly increased in many nations around the world. The Bitcoin price was traded from $18,999 to $21,596 during the previous week.

Executive summary:

1. Older coins have largely slowed their spending, instead younger coins are spending. This is a signal of high HODLer conviction.
2. Long-term investors are significantly accumulating and taking Bitcoins off-market to the cold storages.
3. The total unrealized losses are equivalent to around 55% of the market cap, which is larger than in March 2020.
4. 1.539M BTC were last transacted between $17.6k and $21.2k. This indicates that around 8% of the circulating supply has changed hands in this price range.

The Realized Price is one of the most recognized Bitcoin on-chain models, and is often considered to be the on-chain acquisition price (cost basis) of the Bitcoin supply. The chart below shows how previous bear cycles have all bottomed and established an accumulation range bellow the Realized Price. Time spent below the Realized Price ranges from 7-days in March 2020, to 301-days in 2015.

The MVRV Ratio is currently trading at 0.953 (-4.67% unrealized loss), which is not as deep as the average of 0.85 (-15% unrealized loss) seen in previous bear cycles. This may mean further downside and/or consolidation time is required to establish a bottom. However, it may also signal that a greater degree of investor support exists in this bear cycle.

Both the 2015 and 2018 bear market lows were set with a short-term wick down to the Delta Price (green zone). However, both accumulation ranges spent most of the bottom formation process trading between the Balanced Price (range low) and the Realized Price (range high) as shown in blue.

We can see that the total unrealized losses are equivalent to around 55% of the market cap, which is larger than in March 2020, and not dissimilar in magnitude to the 2018 bear market lows. As prices start to rise, these newly acquired coins switch from holding an unrealized loss, to an unrealized profit, usually starting the bullish cycle again.

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When the Bitcoin price felt to $17.6k, a total volume of 9.216M BTC were holding an unrealized loss. However, after the 18-June capitulation, one month of consolidation, and a price rally to $21.2k, this volume has declined to 7.680M BTC. This means that 1.539M BTC were last transacted (have a cost-basis) between $17.6k and $21.2k. This indicates that around 8% of the circulating supply has changed hands in this price range.

May and June 2022 have seen two impresive capitulation event events, both during the LUNA collapse, and when prices plunged below the 2017 cycle ATH on 18-June. On a 30-day sub basis, these events triggered total realized losses of $27.77B, and $35.5B over a 30-day window, respectively. As shown, these eclipse anything seen historically on a USD basis.

The crypto market behaviour is very emotional. People often sell their coins in irrational reaction of seeing red numbers. Fear and Greed Index, helps to identify the emotional overreactions. Extreme fear can be a sign that investors are too worried. That could be a great longterm buying opportunity.

Sources: https://studio.glassnode.com/metrics?a=BTC&m=addresses.ActiveCounthttps://alternative.me/crypto/fear-and-greed-index/, https://cryptoquant.com/, https://www.tradingview.com/