After experiencing a long distribution period following the ATH, a cooling-off and consolidation period has begun, and selling pressure is significantly weakening.
Aside from the reduction in selling activity, capital inflows remain relatively moderate, although still profit-driven, and sufficient to stimulate local price movements.
During this adjustment process, various volatility indicators have been compressed as on-chain conditions have reached equilibrium, leading to larger-scale market fluctuations typically occurring.
Supply Slowdown
A strong Bitcoin market naturally attracts selling pressure as price increases prompt long-term holders to distribute a portion of their holdings. We can see this through the significant decrease in supply during March and April, with the supply held for 1-2 years dropping sharply, as long-term investor groups distribute tokens to meet new demand before the ATH.
However, the supply held by the investor group of more than 3 years continues to increase, indicating that this group typically waits for price increases before selling their tokens. As of the time of writing, over half of Bitcoin holders have not conducted any on-chain transactions in the past two years or longer.
Last active supply of 1 year or more: 65.8% (red)
Last active supply of 2 years or more: 54.9% (yellow)
Last active supply of 3 years or more: 46.4% (green)
Last active supply of 5 years or more: 31.3% (blue)
The Long-Term Holder (LTH) binary spending indicator is another tool we can use to analyze and visualize the intensity of holder distribution pressure. We note that the LTH supply dropped significantly to $73,000 ATH in March.
However, in the past few weeks, this distribution pressure has significantly eased, providing more breathing room for the bulls and reducing overall resistance.
On the other hand, the decrease in LTH supply is accompanied by a sharp increase in supply held by Short-Term Holders (STH), who represent new investors who recently purchased tokens.
The divergence between LTH and STH supply is exacerbating the situation where distribution pressure from mature investors is cooling off.
The activity indicators also reflect this change in market dynamics and indicate that Bitcoin daily issuance on the Bitcoin network exceeds destruction. In other words, the market now tends to hold tokens for the long term rather than actively distribute them for profit.
Demand Side Remains Moderate
The realized cap is a unique on-chain indicator that measures the accumulated dollar liquidity of “stored” assets in a category. Currently, its value is $574 billion.
Currently, as the market digests the recently distributed supply, the rate of new capital inflows into the Bitcoin network has significantly slowed down from its peak.
Therefore, the daily change rate of the realized cap can be used as a measure of capital inflows. The liquidity injected during the ATH period was very intense, eventually reaching $3.38 billion per day, surpassing the peak of the 2021 bull market and subsequently cooling down.
Currently, this indicator is still in the positive profit-dominant region and is returning to equilibrium. However, with the weakening selling pressure from mature investors, this moderate wave of demand is sufficient to stimulate price movements.
Volatility Compression
With the easing of supply-side pressure and capital inflows, we turn to our volatility tools to lay the groundwork for our expectations for the next move with caution.
For this, we can adopt the seller risk indicator, which assesses the total value of tokens locked up in on-chain spending (realized profit + realized loss) in relation to the size of the asset category (realized cap).
A high value indicates that investors are spending tokens with a relatively larger profit or loss compared to their cost basis. This situation suggests that the market may need to find a new balance and typically experiences high volatility price changes.
A low value indicates that the expenditure of most tokens is relatively close to their breakeven cost basis, indicating a certain degree of balance has been reached. This situation usually means that the “profit and loss” within the current price range has been exhausted and typically describes a low volatility environment.
We can see that the seller risk ratio has significantly decreased in recent weeks, indicating that the market has found a certain degree of balance during this adjustment process.
We can also evaluate market volatility by the percentage range between the highest and lowest price changes in the past 60 days. According to this indicator, volatility continues to compress to levels typically seen after a long consolidation period and before significant market fluctuations.
Tracking Overinvestment
Finally, we can use the URPD indicator to assess the density of tokens, with their cost basis around the current spot price. We use this concept to identify market sensitive points where market trends may trigger reactions from a large number of investors.
As the price moves towards the end of distribution, we note that approximately 15.9% of the token supply is slightly below the current spot price, which could provide strong support.
In contrast to the densely packed cluster of tokens below, only 1.1% of the circulating supply remains above our current spot price, indicating that continued inflows of demand may catalyze price discovery for a period of time.
The STH supply currently stands at 3.36 million BTC, of which over 2.14 million BTC (63.2%) fell into unrealized losses during the recent adjustment period. However, as the market rebounded to above $70,000, this number has dropped to only 230,000 BTC, accounting for about 6.8% of the total supply.
This indicates that although tokens are highly concentrated around the current spot price, there are few unrealized loss tokens, greatly reducing the risk of overinvestment.
Conclusion
After significant distribution by mature investors at the $73,000 ATH, selling pressure has significantly decreased. This has led to reduced resistance on the upside, and even moderate demand is sufficient to stimulate positive price movements.
In addition, volatility continues to compress over a longer time frame, while a dense supply cluster has formed below the current spot price, potentially providing a solid foundation.
Tags:
2023 market trend
glassnode
cryptocurrency market
Bitcoin
Jinse Finance
Source link:
https://www.jinse.com/blockchain/3685644.html
Disclaimer: The content of this article represents the author’s views only and should not be considered as investment advice.
Original article link:
https://www.bitpush.news/articles/6772183
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