Bitcoin on-Chain Analysis an overview of 4/4/22–8/4/22
- The accumulation trend score shows large entities dominating the market.
- 28% of the BTC supply has not moved in a year.
- Exchange balances have begun to decrease after several months of consolidation.
- More than 90% of the BTC currently being transacted previously moved less than one month ago.
- There are 2,473,758 BTC on exchange addresses.
- The HODL wave suggests that Nov 2021 was not a market cycle top.
Accumulation Trend Score
The Accumulation Trend Score is an indicator used to reflect the size of entities that are participating in BTC transactions.
The indicator shows both the size of these entities and the number of new coins that they have gained/lost. The former is done by dividing their holdings over the total supply, while the latter is done by their relative balance change.
Values close to 1 (purple) suggest that large entities are accumulating, while those close to 0 (yellow) suggest that they are distributing instead. Historically, values close to 0 (black circle) are reached in the first bounces after a bear market begins.
The reason for this is that large holders are offloading their positions in anticipation of a long-term downtrend. This is also evident when looking at the HODL wave.
Currently, the indicator shows a value of 0.78, which means that large holders are dominating current transactions.
With the exception of the period between Oct 2021 and Jan 2022, such values have been seen prior to significant upwards price swings (black circles). It remains to be seen if the same will occur this time around.
Bitcoin (BTC) exchange balance
The amount of BTC that is held on exchanges has been decreasing since 3,118,057 coins were held in exchange addresses. The value is at an all-time high.
BTC held on exchange wallets has been falling since March 2020 (black circle), when a total of 3,118,057 coins were held in exchange addresses. This value still stands at an all-time high. In the period between April 2021 and March 2022, the balance hovered between 2,500,000 and 2,700,000. This potentially resembled a period of accumulation prior to another increase.
However, another sharp fall ensued at the end of March (red arrow) and the number of BTC on exchange addresses is currently at 2,473,758. This is the lowest value since Sept 2018.
Spent Output Age Bands
SOAB takes note of a certain day’s transactions and shows the time in which the preceding unspent transaction output (UTXO) was created. It does this by using differently coloured bands.
Therefore, the bands of 1m-2m show current BTC transactions that have UTXOs created between 1m-2m ago.
An interesting observation comes from looking at periods in which long-term bands spike. As seen in Feb 2018 (black circle), they usually spike at the beginning of bear markets, when BTC bounces after a significant drop.
This suggests that coins that have previously not moved for a long period of time are now being spent in anticipation of a prolonged downtrend.
In contrast, the movement since Feb 2021 has mostly consisted of short-term participants. With the exception of two periods (black circles) in May 2021 and Feb 2022, more than 90% of the transactions had their previous UTXOs created less than a month ago.
The HODL wave shows the percentage of the BTC that has moved in a specified period of time. Therefore, if the HODL waveband is 3–6 months, it means that 20% of the total BTC supply previously moved between 3–6 months ago.
The main difference with SOAB is that the former takes into account current transactions and measures when they had previously moved. In contrast, the latter determines the percentage of the total BTC supply that has moved in each specific time period.
Contrary to SOAB, the HODL wave short-term bands increase considerably very close to a market cycle top. The reason for this is that long-term holders are selling their coins to short-term participants.
Therefore, a market cycle top usually consists of entirely short-term participants, since long-term holders have already distributed their coins to them.
This was visible in 2013, and 2018 and the April 2021 cycle tops (black circle) short-term bands spike close to a significant market cycle top.
However, it did not occur during the Nov 2021 top (white circle), leaving open the possibility that this was just a local top instead of an absolute one.
1–2 year bands swell
During the current bull run, the most interesting development is the swelling of the 1–2 year band. This has been ongoing since Dec 2021 (black arrow).
This has occurred directly as a result of the decrease in the 6m-12m band.
Therefore, participants that entered the market during Dec 2020-July 2021 (black circle) have been holding, thus their coins have now crossed over the 1–2 year threshold.
The price from Dec 2020 to July 2021 was from $28,000 to $64,000. Therefore some of these buyers are at a loss while some are at a profit. This is a positive sign since it shows conviction in the market despite the not decisively bullish price action.
Such increases of the 1–2 year band alongside a fall of the 6–12m bands have occurred thrice prior:
- June 2012
- March to Dec 2013
- Jan 2019
In hindsight, all these three periods marked phases of accumulation prior to the beginning of a bull run.
Currently, 28% of the total supply of BTC has not moved in at least a year.