Bitcoin on-chain analysis, an overview of 4/15/22–4/22/22
BTC's correlation to Nasdaq is at unprecedented levels.
Beneath the surface continuing to see the accumulation.
The 5 indicators of the strong fundamentals of the Bitcoin network updates.
Bitcoin On-Chain and Derivatives
From a price structure standpoint, Bitcoin is still in “no man’s land”(with respect to the value/momentum framework mentioned in previous posts. )See several consecutive closes>$47k as momentum and the low $30K as value.
In addition to this area being a pivotal level from price interaction and being right around the 2022 yearly open, here are two charts illustrating why I view this recent rally to $47K as a failed attempt to reclaim momentum:
The cost basis of market participants less than 155 days old
180W Exponential Hull Moving average
Generally speaking, I have a non-conformist viewpoint.
Recently Bitcoin has been trading at an extremely high correlation to the Nasdaq recently. Below you can see the 1D correlation of BTC to Nasdaq, reaching as high as 0.98. Whether Bitcoiners view BTC this way or not, the fact is that the broader market has been viewing this as a high beta asset.
BTC 1D Correlation to NQ
You need one of two things for BTC to move up.
Either: Tech to rebound and drag BTC up through correlation or through decoupling.
In a broader sense though, you will eventually get a transfer of supply from correlation trading entities to convicted crypto natives, high net worth individuals, etc.
Here we are looking at the amount of supply that hasn’t moved in at least a year and comparing the 7DMA of how far the Nasdaq is off its highs. What we see is that despite the Nasdaq is down about 20%, an all-time high ~64% of Bitcoin’s circulating supply has not moved. This illustrates the fact that there is a convicted base of long-term Bitcoin HODLers out there utilizing BTC as a store of value despite uncertainty in global markets.
Bitcoin outflows from exchanges are rolling over, entering back into the zone highlighting a rate of outflows from exchanges only seen three times previously in Bitcoin’s history.
We’ve also seen some whale BTC accumulation continuation this week.
The story of this bear market is the transfer of supply from correlation trading traditional finance entities to long-term convicted crypto natives, High Net Worth Individuals, and forward-looking institutions.
Once this supply transfer is complete, we can suspect see a prolonged multi-week decorrelation. This would be quite powerful and have a lot of ideological reflexivities.
We should continue to trade at an extremely high correlation to Nasdaq, but you should suspect that the pendulum will swing in the opposite direction in the coming months. It will be obvious if/when this occurs.
The 30-day moving average hash rate reached a historical ATH of 166 EH/s on April 15, 2021. At the same time, Bitcoin was setting its previous ATH of $64,850 (blue circles).
The hash rate has been steadily increasing and breaking new all-time records. The current value of the Bitcoin network’s 30-day moving average hash rate is 204 EH/s. Thus, this is 23% higher than the previous ATH, despite BTC being priced at around $41,500 today (green circles).
Lightning Network Capacity
Lightning Network capacity has experienced exponential growth and tripled between April and November 2021 (green area). Interestingly, this time frame includes both the summer correction in the BTC price with a bottom at $29,000 and the new ATH of $69,000 reached on November 10, 2021.
What’s even more interesting is that despite the bearish sentiment in the BTC market, Lightning Network Capacity continues to rise and set another ATH. The current record is at 3589 BTC and was set on April 10, 2022 (blue circle).
Number of Addresses with a Non-Zero Balance
A chart of the 30-day moving average of this metric seems to resist any downturn. It has almost always been monotonically rising since the inception of the Bitcoin network.
Currently, the indicator sets a new ATH each day. On April 19, 2022, the number of addresses with a non-zero balance was 41,243,796 (green circle). This is yet another argument for the dynamic growth and strong foundations of the Bitcoin network.
The long-term, 5-year chart of the illiquid supply ratio is also dominated by an uptrend with minor corrections. The only two major corrections occurred after the aforementioned late 2017 peak and at the April 2021 ATH (blue areas).
Interestingly, illiquid supply continues to grow during Bitcoin’s current price correction, and this growth has only accelerated in the last two months. Currently, almost 14.5 million BTC is already considered illiquid (green circle).
Number of Accumulation Addresses
On the graph of the number of accumulation addresses going back to May 2021, we see a fairly monotonic upward trend. However, since mid-February 2022 — despite the decline in the price of BTC (arrow) — the growth in the number of accumulation addresses has accelerated rapidly and the growth curve has become sharper (black line).
Currently, the indicator is recording a new all-time record near 610,000 addresses that hold BTC and have never spent it. This is another signal of ongoing BTC accumulation and further evidence of the increasingly strong fundamentals of the Bitcoin network.
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