The transition between the end of the current down cycle and the upcoming up trend works very much like previous bear markets. Current supply dynamics in short-term holder earnings show that conditions conducive to a market reversal are visible to develop. On-chain analysis of the situation.
Analyse on-chain du Bitcoin (BTC) – Ce cycle baissier est-il différent ?
Bitcoin continues its recovery
continuation of its bullish recovery, Bitcoin (BTC) price. surpasses $22,000, erasing the decline caused by the FTX collapse in November 2022.
While the short-term BTC holder and the average holder have raised their heads above water, The current market structure shows signs of a transition from the end of a bear market to the beginning of a bull market eagerly awaited.
Figure 1: Daily price of BTC
To visualize this transition between bear market and bull market, Today we examine the dynamics of the profit supply held by the cohort of short-term holders through Bitcoin’s last three bear cycles.
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The supply dynamics in favor of STH
A close observation of the Bitcoin blockchain data reveals an observation: While BTC market cycles do not repeat identically, they do rhyme significantly.
Studying the supply of BTC held in profit makes it possible to clearly illustrate this periodicity while providing a clear visualization of the market’s profitability dynamics during its downtrends.
Typically The supply of BTC in circulation tends towards 100% profitability at the end of the bull runwhen mania and bullish volatility pushed almost all participants into a state of latent profit.
Figure 2: Supply percentage of profit (2014 – 2015)
Then follows a slow decline in profitability for all holdersuntil after the formation of the “technical” low point of the BTC spot price, a floor is reached that initiates a clear trend reversal.
From the point of view of short-term holders (STH) after a period of sustained growth in this cohort’s supply profits (in green), The end of the bull run is marked by the continuous and gradual decrease in profitability of STH positions (in light red).
During this time, they actively participated in reallocating capital at a loss during bear markets when events of Notable loss-taking occurs when STH profit supply reaches a critical threshold below 3% (in dark red), as during the 2014-2015 bear market.
Figure 3: STH Profit Offer (2014 – 2015)
The same observation can be made for the bearish cycle of 2018-2019where short-term profitability fell for more than a year before a bullish impulse reversed the balance in April 2019.
Again, throughout the bear market, we can see a significant supply dip in STH earnings, which then widens to signal a long-term trend reversal.
Gaining almost 6 million BTC to around 30,000 BTC before the April transition, this cycle particularly well illustrates the losses that short-term BTC holders have suffered during the bear market.
Figure 4: Supply in profit of STH (2018 – 2019)
Currently we can observe that a very similar conformation takes placesuggesting that conditions for a market reversal are developing.
After a rapid and severe drop in profitability following the April 2021 surrender, the STH cohort experienced a gradual decline in the profitability of their holdings through January 2023 with the following four events:
- January 2022: elimination of leverage on derivatives;
- May 2022: Earth/MOON collapse;
- June 2022: Celsius bankruptcy;
- November 2022: Collapse of FTX and Alameda Research.
Since the recent surge in BTC price The STH’s earnings supply is seeing a fresh increase and is now exceeding the levels seen during the second peak in November 2021.
Figure 5: Supply in profit of STH (2021 – 2023)
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Summary of this on-chain analysis of BTC
In summary, this week’s data tells us that Despite appearances, the transition between the end of the current bear cycle and the beginnings of the upcoming uptrend works very much like previous bear markets.
This is indicated by the comparative study on the profitable supply of short-term owners The recent price increase has resulted in a significant increase in unrealized profitability within this cohort, even exceeding the values of the second ATH in November 2021.
This is indicated by the current design of STH’s prize offer the conditions for a market reversal are rapidly evolving.
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Sources – Figures 1 to 5: Glassnode
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On-chain analyst, passionate information asymmetry fighter.
My goal is to educate everyone about the state of Bitcoin (as an asset and as a distributed network) through the prism of on-chain analysis.
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