Weekly Onchain Insights: Liquidations Week
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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.
The Recent Bitcoin Drop Explained:
Bitcoin Tanks Below 11k for the first time in over a month
On-Chain Flows Shows That With The Recent Price Drop in Bitcoin,
There was a Spike in the Money Flowing into Coinbase
What does Inflow Volume mean?
Total amount (In $ or tokens) entering exchange(s) deposit wallet
By analyzing the inflow volume in Coinbase, we were able to spot that during the last 30 days, we can see that the flows remain relatively steady, except on August 17th when a spike in inflows coincided with a local top in Bitcoin’s price.
A similar pattern took place this Wednesday, the same day the price of Bitcoin dropped more than 2% and prior to the 10% drop on Thursday. A few days earlier, on September 1st Binance saw it’s highest inflows in over a month, with over 19,000 BTC being deposited to the exchange.
Derivatives Indicators Confirm High Liquidations Taking Place
Bitcoin has been struggling to sustain above the $11,000 mark. Following the recent inflows into exchanges, our derivatives market indicators are showing some classic textbook bearish signals.
1) As can be seen in the graph below, Bitcoin’s perpetual swaps volume is rising while open interest falling. This trend suggests a substantial amount of long positions got liquidated over the past couple of days. Since the price of Bitcoin started to drop on September 1, perpetual swaps volume more than doubled as the price plummeted.
2) Going deeper into perpetual swaps metrics, another rule of thumb when analyzing derivatives is that falling prices along with declining open interest, suggests positions being closed. In this case, due to the spike in volatility, it is evident that several traders got liquidated in the last couple of days. Additionally, this points to weakening bearish momentum, as an increase in short positions would have caused open interest to grow as prices dropped.
Bitcoin Price Analysis: $10,540.47 (5:00am EST 09/04/2020)
Can Bitcoin bounce back to $11,000 in the short term?
The In/Out of the Money Around Price (IOMAP) indicator reveals that Bitcoin faces stiff resistance ahead. In order for Bitcoin to reach $11,000 again, it has go through 1.2 million addresses that previously bought 864 thousand BTC.
If Bitcoin breaks the $11,000 barrier, the most crucial resistance level sits at that $11,500. Roughly 1.82 million addresses previously purchased approximately 1 millon BTC at the range between $11,354.75 and $11,663.72.
Looking at the levels of support, our IOMAP shows that Bitcoin sits on a massive supply barrier around $9621,01 that may abosrb the downward pressure. Over 1.2 million addresses had previously purchased a total of 783 thousand BTC between $19,481.61 and $9,790.58.
ITB DeFi Insights: YFI Defies Gravity
An On-Chain Analysis
Despite the market-wide drop, yearn.finance’s native YFI token managed to remain around the $30,000 mark. YFI has been on a hot streak, increasing by over 10x in August alone. Having launched with a fair distribution and near-zero market cap, YFI is up a staggering 1,300x within two months of its inception reaching a market cap of over $1 billion.
The recent price growth, along with its already remarkable appreciation, has had implications in on-chain activity.
YFI Holders are Sitting on Abnormal Profits.
What does Average Balance Mean?
Market cap divided by number of addresses (with a balance of tokens).
The average balance of a YFI holder is currently of over $100,000, eclipsing that of other DeFi leaders. In comparison, LINK has an average balance of $70,000 and LEND of $6,000 despite their parabolic price action. The biggest factor driving this divergence is likely YFI’s fair launch, which allowed early adopters to profit significantly, to say the least.
Large YFI Holders have Been Slowly Selling or Taking Profits.
What does Inflow Volume mean?
Total amount (In $ or tokens) entering exchange(s) deposit wallet
As can be seen in the graph above, the dollar inflows of YFI into centralized exchanges recently hit an all-time high. This is a potential indication of large holders seeking to sell their positions following the parabolic run-up. That being said, the $30 million in inflow volume is still relatively small in proportion to YFI’s billion dollar market capitalization.
While yearn.finance’s yield optimization and fair launch has allowed it to become one of the most innovative and respected protocols in DeFi, its price action signals a high amount of risk for those speculating in YFI’s token price. As evidenced by on-chain data, holders are appearing to take profits as prices retrace from nearly $40,000 to $27,000 within a couple of days.
ITB Bonus Insight of the Week:
Despite the massive speculation, on-chain data suggest big players are getting interested in Chainlink (LINK)
What does Large Transactions mean?
On-chain transactions with a value of $100,000 or greater.
Large transactions used to be a rare occurrence for LINK at the beginning of the year. IntoTheBlock’s large transaction analysis shows that there were only 22 LINK transactions over $100,000 in mid-April. That number skyrocketed to over 1200 on August 12.
Moreover, on-chain data supports the narrative that Chainlink’s appeal is growing among institutional investors and whales. This trend is evident when looking at the average transaction size on Chainlink.
On September 2, the average Chainlink transaction was over $27,000, even with the price of LINK decreasing to $15. To put this in perspective, on January 1st of 2020, the average on-chain transaction was $1,279.
This Week in IntoTheBlock Predictions
A few weeks ago, we announced the release of IntoTheBlock Price Predictions. With this release we have added price predictions for Ethereum, Litecoin and Bitcoin Cash, as well as more prediction models for Bitcoin. We also added support for a much-requested feature: predictions notifications. IntoTheBlock subscribers will be able to obtain browser notifications for their favorite tokens based on their desired outcome (e.g. notify me when Ethereum is predicted to go up).
How Did We Do Over the Last 7 Days with our Bitcoin 50 Basis Model?
IntoTheBlock’s Bitcoin 50 basis points prediction model managed to achieve 81.58% accuracy this week. The model gave out a total of 168 predictions as it only provides one when it has a high degree of confidence. Throughout this week, the model did not drop below 65% on any day.
Our predictions for the Bitcoin 10 Basis Points Model have been on fire 🔥! It accurately predicted the fall from $11,377.31 to $10,720.21.
This means, 6 accurate directional predictions in 7 hours!
