Weekly Onchain Insights: Crypto crashing and speculation spiking
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Every week the IntoTheBlock team publishes a newsletter that summarizes key data insights about the crypto market. Below is a quick summary.
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Hey onchainers,
Welcome back to IntoTheBlock’s newsletter. We have created a different type of newsletter for crypto fans that is not about news, but about data and analytics. Every week, we deliver valuable data insights about the crypto market.
Bitcoin Price Analysis: $46,421.15 (4:00 am EST)
Bitcoin price is currently sitting at $46,421.15, and is down 13.81% over the past week. By analyzing the profitability of traders near the current price of BTC, we can understand the circumstances and price ranges expected to act as support and resistance now.
The IOMAP is useful for traders to know the next price levels where addresses are expected to buy and sell based on users’ on-chain positions and unrealized profits. As you can see in the chart below, the size of each cluster represents the volume of BTC previously bought at a specified price range.
Through the In/Out of the Money Around Price (IOMAP), we observe that there isn’t significant support that could prevent BTC from returning to $39k. The first level is located between $45,033 to $46,399, where more than 320 thousand addresses previously acquired 148 thousand BTC. If this range is broken, the next level to watch out for is between $39,454 to $40,877, where 226K BTC had previously been bought.
On the other hand, Bitcoin is facing stiff resistance ahead based on on-chain data. The first one is the current resistance it is facing around the $47,800 mark, where 280.95K BTC has been bought by 679.91 thousand addresses. This creates resistance from many of these holders looking to close their positions to break-even. After that, there is an ever bigger level between $48,199 and $50,555 as shown in the graph above, where more than 1.1 million addresses previously acquired 598 thousand BTC.
See the IntoTheBlock Global In/Out of the Money
This Week Analysis: Crypto crashing and speculation spiking
For the second time this year, we experienced a massive correction in the crypto markets of over 20%. Although we are in a bull market, history has proven before that Bitcoin is prone to massive corrections of 30% during the cycle. No one said this was going to be a smooth ride.
During the recent correction, the market cleaned out overleveraged traders, as they encountered over $1.7 billion worth in liquidations. Since derivatives traders typically use leverage for their positions, they also face the risk of getting liquidated if the value of their positions drop past the limits on their margin account.
In decentralized finance (DeFi), we observe a similar trend. Liquidations in the lending protocol Compound reached the second highest ever on Feb. 23.
The $87.8 million worth of liquidations on Tuesday is more than had been liquidated the entire month. This further demonstrates the high leverage traders had been taking on prior to the crash.
But before the recent event happened, there were signs pointing out that the marketing was overheated. The Funding Rate, which refers to a fee charged to perpetual swaps holders depending on the premium/discount and the positioning of contract holders. If the price of a perpetual swap is at a premium (price of perpetual swap > spot price), holders going long pay short holders this fee.
As can be seen in the graph above, the funding rate across several exchanges was above 0.1%, while the normal rate is 0.01%, meaning that highly speculative action was happening on the futures market.
As well, the number of addresses holding Bitcoin for under one month — classified by IntoTheBlock as traders — reached record highs in February. This metric points to high amounts of speculation and short-term trading taking place over the past few months based on blockchain data.
The 40% increase in traders points out that new addresses were chasing the price of Bitcoin over the past 2 months. But is important to note that, even that the number of addresses increased, the volume dropped by 5% compared to the month of January, meaning that there were some recent outflows of capital.
And as the volatility and speculative action increased, on Sunday, coinciding with the Bitcoin drop, there was a spike in the amount of BTC entering exchanges, which can potentially be interpreted as a sign of holders looking to sell in centralized exchanges.
That day, from the 59.97k BTC deposited into centralized exchanges, 33.96k BTC went to Gemini. But more impressively, it was the second-largest deposit of Bitcoin into exchanges over a 13 month period. Someone big was selling in Gemini last Sunday.
And not only we saw big activity on centralized exchanges, as the speculative action happening this week also affected DEXes and the Ethereum network.
This Tuesday. the demand in Ethereum blockspace went through the roof. The Ethereum hourly fees, which refers to the total value spent in fees in Ethereum in a given hour, reached is highest number ever.
That day, the Ethereum hourly fees went as high as $4,561,988.54. And as went to a new high, so did the Daily Gas Cost at 983.2 Gwei.
