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Bitcoin on-chain analysis, an overview of 3/25/22–4/1/22

Bitcoin On Chain Analysis and Derivatives

From a price structure standpoint, Bitcoin reacted quite cleanly off prior range highs during this pullback thus far; and is now back above the yearly open and short-term holder cost basis at the time of writing.

A good portion of the driver of this move has simply been a rebound in traditional risk-on assets, with the blue indicator on the bottom of this chart showing the growing 1D correlation to the Nasdaq on this rebound.

As stated above, for the time being, Bitcoin is back above the short-term holder realized price, a psychological level we have spoken about time and time again.

Aside from the correlation to risk on equities, another driver of capital inflows has been the Luna Guard Foundation accumulating a Bitcoin reserve; both directly, as well as through front-running and general narrative momentum. LFG now holds 30,727 BTC, roughly $1.5B at current market prices.

With this, we have seen coins being taken off exchanges fairly aggressively throughout this rally.

In addition, the OTC desk’s Bitcoin holdings have declined as well.

And lastly, illiquid supply has taken another massive leg up, showing coins moving to on-chain entities who have a history of selling less than 25% of their BTC.

The open interest build-up we talked about last week has declined a fair amount, squeezing out some shorts on the push above $46K as well as longs on this pullback over the last 48 hours. Suprised to have not seen more reaction above $46K if this build-up was aggressive shorts as we had hypothesized.

Spot premium over perps persists, both from an aggregated standpoint (top indicator), as well as looking at Coinbase spot versus Bybit perps specifically (bottom indicator). Prolonged regimes of spot premium are good times to allocate to BTC, especially when taken into context of positive price action.

One macro shift that is notable in the Bitcoin derivatives market is the percentages of futures open interest collateralized with crypto versus stablecoins.

This creates a healthier backdrop for the market. Why? When longs are collateralized with BTC, they have a negative convexity; meaning as price goes against them, not only does their PnL decrease but the value of their collateral as well. With stablecoins as collateral, this effect is no longer there. Conversely, shorts that are margined with stablecoins versus crypto are more likely to be squeezed, because they no longer have an inadvertent hedge against price appreciation via their collateral.

Implied volatility from the options market is on the decline, despite Bitcoin being at a pivotal HTF price level.

The last trend to note, which we talked about last week; the US trading hour price premium has been in an uptrend for roughly a year now, although declining slightly this week. Something to keep an eye on, potentially indicating a shift in market dominance from Asia to the United States.

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Heinrich Bredenkamp

Crypto Enthusiast and Investor. I give regular market updates, trends and analyses regarding cryptocurrency. I use a variety of sources for my content.