Data Alert-1: Bitcoin Daily Sent Volume (USD) is Increasing
This is the first of a format I will use to share an idea in a very short article form. This one deals with cryptocurrencies. So read on if it of interest to you.
Summary:
There is a marked increase since August 14 onwards in the amount of Bitcoin sent on-chain. This might be an early indicator of major price movements on top of the signifant correction early on in September.
Details:
The amount sent figure represents the on-chain Bitcoins sent during one day in USD terms. Not all of this amount is spent and various websites report different or adjusted figures. This has not been a good indicator on a daily basis as major price moves have happened while there was not a significant change in this figure. However, on two occasions of major price movements, it had been a very reliable indicator. Note that since 2017 (i.e. in around 3.5 years), there have been only been three occasions with the latest one building up now.
The amount sent figure remained around 5 to 10 billion USD on average from September 2019 to August 2020.
Previously it has seen a significant increase in mid-2017 onwards and during July 2019.
In the former one, a major rally followed the increasing amount sent volume. In the latter, a major correction followed the increasing amount sent volume.
So the figure might be useful to indicate a shift in sentiment or a major movement towards one direction. Data points are limited but in the previous two occasions; when there is sustained upswing in the amount sent, some price movement follows. Note that price moves irrespective of a change in this metric. Yet a change in this metric which happens rarely on a major scale may be an early indicator for a major move.
Recent Observations:
Amount sent on August 14 was 16.9 USD billion, topping on August 17 with 35.4 USD billion. Then pulling back 16 USD billion and marking the highest for this year today on September 11 with 35.6 USD billion with 24 hour data still rolling.
Implications:
The August 14 to August 17 period saw the price of Bitcoin increase from around 11600 to 12500. Then prices fell back to around 9800 while the amount sent on-chain remained higher than the year’s earlier periods.
As the amount sent volume started to pick up again from September 7, the price of Bitcoin stayed relatively calm around 10250.
It is likely that the current calm is masking a major move — yet that might not come very fast. Referring to previous instances, such periods might take weeks to build up. I have no likelihood meter but if it is to the downside, testing 9000 should not be a surprise. However, if the upside is tested; then this could be an interim correction that will see previous high of this year breached decisively upwards. To make matters even more complicated, a false break out move in one directions can turn in to a move to the reverse as well. Just note that the prices are not reflecting the significant build-up of on-chain transaction activity underneath — wherever that may lead.
Data:
Data and charts are from www.bitinfocharts.com:
Disclaimer: This content is intended to be used and must be used for informational purposes only. It is very important to do your own analysis before making any investment based on your own personal circumstances. You should take independent financial advice from a professional in connection with, or independently research and verify, any information that you find here and wish to rely upon, whether for the purpose of making an investment decision or otherwise.
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