Friday, November 25, 2022
HomeCryptoBitcoin (BTC) On-Chain Analysis – The Final Redistribution Phase Sets In

Bitcoin (BTC) On-Chain Analysis – The Final Redistribution Phase Sets In

Moving very calmly since the high volatility events of June, BTC now finds itself close to historically low levels of profitability. A phase of redistribution sets in as the losses realized by long-term investors and the fall in their profitability pushes them to sell. Onchain analysis of the situation.

Bitcoin stumbles near its local floor

Bitcoin (BTC) price rebounds near the lower boundary of $19k and seems to lateralizewith volatility dropping drastically over the past week.

Evolving very calmly since the high volatility events of June, BTC is now close to historically low levels of profitabilitygenerating investment opportunities with asymmetric expectations of gains over the long term.

Figure 1: Daily price of Bitcoin (BTC)

This week we will assess:

  • I’general profitability of the market ;
  • them spending behaviors short and long term investors;
  • the passage of the market final redistribution phase.

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The entire market plunged into loss

The Bitcoin market is for the fifth time in its history in a general state of loss, as indicated by the BTC realized price metric.

This metric measures the price of BTC when creating a UTXO and serves as a proxy for establishing the diagnosis of market profitability. Representing the price paid when buying a fraction of BTC, this metric symbolizes the aggregate market base cost.

BTC Realized Price 050722

Figure 2: Realized Price

With the spot price currently below the realized price, this indicates that, as a whole, participants paid more for their satoshis than their current value.

A similar view can be taken of the cohort of short-term investors (STH), holding positions for less than 155 days. Providing a short-term signal of market profitability, the STH basis cost is a powerful directional indicator when interacting with the spot price.

BTC Realized Price STH 050722

Figure 3: Realized price of short-term investors

Trading below market price since the sharp drop in December 2021 (not including a slight breather at the end of March), this metric tells us that the average STH currently holds a loss position of more than 50%. This condition has made these players avid contributors to the selling pressure established over the past 8 months.

The cohort of long-term investors (STH) is not to be outdone, despite its ability to firmly hold positions ranging from 155 days to several years.

Indeed, two days after the realized price fell below the spot price, the realized STH price met the same fate, plunging this cohort into a state of latent loss.

BTC Realized Price LTH 050722

Figure 4: Realized price of long-term investors

Nowadays, the average LTH is down 14% on its positions. This loss of profitability caused part of the cohort to realize losses by selling coins accumulated during the bullish cycle of 2020 – 2021.

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Significant realized losses

In response to this loss of overall profitability, added to a tense global macroeconomic context, IParticipants have made increasing losses since December 2021.

aSOPR, calculating the ratio between the buy and sell price of a UTXO, measures the aggregate percentage profit/loss induced by sales.

BTC aSOPR 050722

Figure 5: aSOPR

After falling below the neutral zone (aSOPR=1) for an extended period in May and hitting a low of 0.928, the metric now registers a value of 0.965. This signals that the aggregate daily losses realized by the market are around – 3.5%.

The cohort of long-term investors has freed her from powerful lossestypical of the extremes of profitability achieved by this cohort of coins older than 155 days.

Driven by the invalidation of the token level of $20k, the losses realized by these entities rapidly increased, reaching a ratio of 0.611.

BTC STH-SOPR 050722

Figure 6: STH-SOPR

This indicates that the average loss achieved by an LTH is close to – 40% and represents the lowest value of the current bearish cycle.

This high level of loss is explained by early BTC purchases came from some LTH from the beginning of the price drop in November – December, today redistributed in pain.

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Historical redistribution zones

A asymmetry in the magnitude of loss taking between STHs and LTHs during bear markets identifies periods when LTHs are making more painful losses than their short-term counterparts.

These periods (red) mark the beginning of phases of large-scale redistribution of circulating supplyunfolding as investors give in to selling pressure.

Figure 7: Zones of capital redistribution during bear markets

These moments preceded the darkest hours of bear markets from 2015 -16 and 2018 – 2019 and signaled areas of attractive long-term accumulation.

In the current down cycle, this period occurred from the beginning of May and preceded a price drop of more than 50%.

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Summary of this onchain analysis

In sum, this week’s data confirms the entry of this bearish cycle in final redistribution phase.

The whole market, as well as the cohorts of short and long term investors are in state of considerable latent loss on their positions.

This loss of profitability causes a increased selling pressure that pushes participants to realize substantial lossesselling their offer to the most resilient investors.

This phase of redistribution takes hold while the losses made by the LTHs are qualitatively higher than those of the STHs and signals a generational buying opportunity.

Sources – Figures 2 to 7: Glassnode

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