Weekly Onchain Insights: The PayPal Effect
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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.
This Week’s Analysis: The Paypal Effect
On previous edition we covered some known events that had a positive effect on the price action of crypto-assets, such as the Coinbase or Binance Effect. But the catalist of the recent Bitcoin bull run, which led to a 7% increase and 15-month high of $13,000, wasn’t a listing of a token on an exchange, but rather the crypto adoption of one of the biggest players in the traditional market, PayPal.
PayPal officially confirmed it was entering the cryptocurrency market by allowing its users to buy and sell crypto assets.
Leveraging blockchain’s public nature, IntoTheBlock’s machine learning algorithms extract key data that provide a deeper dive into the recent event and its effect on Bitcoin.
New Money Flows confirms the increasing demand for Bitcoin
The number of addresses with a holding period of less than 30 days, reached on October a high of 3.34 million addresses that in aggregate hold 1.68 million BTC
The Recent Rally was likely fueled by Institutional Investors
IntoTheBlock’s Large Transactions Volume, which aggregates the total amount transferred in transactions of over $100,000, provides a glimpse into whales and institutional buying/selling activity.
Total “large transactions” volume hit a yearly high of over 4.05 million Bitcoin on October 21, with an aggregated value of $48.1 billion. This number has been increasing significantly since mid-August, potentially indicating institutional demand for Bitcoin.
Derivatives Turn Bullish on Bitcoin
Bitcoin’s growing derivatives markets paint a similar picture to the one we are observing on-chain. Observing the dominant futures contracts for Q4, we can see that the market has gone from neutral to cautiously bullish in the last few months.
The annualized % return indicator calculates the implied return for futures contracts if they were to expire a year from now. While in September most contracts were pricing in a small 0 to -1.8% annual return, this has grown to an equivalent of 11% to 18% for futures contracts expiring on October 30.
Furthermore, by analyzing perpetual swaps we can reaffirm this stance from derivatives markets. Open interest in Bitcoin perpetual swaps recently reached a new yearly high along with the price action. While open interest quantifies the total dollar value of outstanding contracts, both long and short, generally when price increases along with open interest, it can be interpreted as a bullish signal.
Open interest in Bitcoin perpetual swaps recently reached a new yearly high of $3.6 billion along with the price action.
As Bitcoin reaches $13,000 again, the number of addresses profiting also reached a new high
Using ITB’s Historical In/Out of the Money indicator, we can observe a large shift in the number of addresses profiting when compared to the yearly low in March. The Historical In/Out of the Money provides the distribution of in-the-money (profiting) and out-of-the-money (losing money) positions over time, and allows us to determine the number of investors that would have made a profit if they had sold their position at the price at that moment in time.
At the time of writing, Bitcoin sits at around $13,103. The last time Bitcoin was above $13,000 was in late June 2019 and since then, it reached a low of $4,909 on March 16 of this year. At that moment, 7.48 million addresses (25.21%) were “in the money” while 17.43 million (58.76%) were losing money on their positions.
Along with the PayPal announcement, this recent BTC rally has also been fueled by the slowing down of the DeFi craze (leading crypto investors to move to less risky assets), and a number of corporate purchases of Bitcoin from the likes of MicroStrategy, Square and Fidelity Digital Assets.
With the 7% jump followed by the PayPal announcement, the number of addresses profiting from their BTC positions (“in the money”), reached a new record with 32.26 million addresses (96.41%).
