Bitcoin Market Analysis (December 20th — December 26th)
1.The market rose last week, and the exchange ended the recent trend of weekly Bitcoin net withdrawals, with a net inflow of 17,000 BTC leaving, the reserve balance at 2.56 million. The BTC reserve balance on the exchange is at a three-year low.
2.Through the dismantling of the recent exchange chip flow structure, combined with the help of indicators such as LTH SUPPLY and STH SUPPLY, we have observed that short-term holders have sold 300,000 Bitcoin in December and 80,000 Bitcoin in the past week. Long-term holders remain relatively restrained. Since December, the number of Bitcoin holdings has steadily decreased, and there has been no significant selling or increase in holdings in the past week.
3. The CDD and SVAB indicators also reflect that large funds (patient investors, whales with large holdings) are still dissatisfied with this price and the sales force is extremely low.
4. The Illiquid supply is close to 14.4 million Bitcoin. It is currently growing at a rate of 100,000 Bitcoin per month. The scarcity of chips in the market has further intensified, and the fundamentals are still positive.
5. NVT Signal pointed out that the current Bitcoin price is lower than the normal network transmission value, and the value is about -2.0 standard deviations. There are not many such cases in history, but they have risen to varying degrees in the weeks after each occurrence.
6. The miners selling intensity is extremely low. Currently, about 106 Bitcoin flow from the miner’s wallet to the exchange every day, which is far below the peak level of 548 in January. The Puell multiple indicator shows that we are still in the middle of the major cycle.
7. Given that the fundamentals remain healthy, this report considers this pullback to be a healthy market adjustment, which does not change the long-term trend of Bitcoin. This pullback also provides a rare opportunity for layout, as the current sell-off is gradually weakening, and we continue to be bullish on the future market. At the same time, this report believes that the current indicators are still on the low side of normal and have not yet reached their most frenzied stage. Therefore, the time cycle of the current bull market is extending, and the market is expected to return to the upward track in the first half of 2022.
I. BTC Fundamental Analysis:
Last week, the exchange BTC reserve balance ended the net outflow trend, with a net inflow quantity of about 17,000 Bitcoin last week, and the remaining quantity of centralized exchange BTC is about 2.56 million. (Note: Data statistics caliber is glassnode, data is dynamic data, historical data will be updated with algorithm iteration). The current centralized exchange BTC reserve balance is still at its lowest level in 3 years. This general trend that has continued since the “312” (March 12) event in the cryptocurrency industry in 2020. However, it will be important to keep an eye on exchange position changes, as a large, long-lasting net inflow could have a reversal impact on this trend.
Chart 1: Last week, the BTC reserve balance of centralized exchanges ended the downward trend, with a net inflow of more than 17,000 in a single week.
Combined with other indicators, this report suggests that the recent net inflow of chips on the exchange may be the work of short-term holders:
SVAB, CDD, LTH supply, STH supply and other indicators can assist us in making a judgment that:
Firstly, SVAB, (Spent Volume Age Bands) refers to the total number of Bitcoin holders spending (selling) the Bitcoin in their hands, divided by the different time periods of these Bitcoin holdings (UTXO creation to destruction time), counting the percentage of each time period.
We usually regard UTXO holdings for more than 6 months as long-term investors with a long time span.
By observing the proportion of the number of BTC sold by these long-term holders, we found that the proportion of more than 6 months has been within 5% for a long time, and it will be in the range of 2%-3% in the near future. It shows that long-term holders account for only a small part of the total number of chip-selling transactions in the market, which proves that their willingness to sell chips is quite low.
Chart 2: The percentage of long-term holders (more than 6 months) in SVAB who have sold in the recent past is not high and remains at around 2%.
The second is the long-term and short-term holders’ Bitcoin holdings. LTH Supply (long-term holders’ Bitcoin holdings) has maintained a stable trend in the near future, and there has been no large-scale distribution, while STH supply (short-term holders’ Bitcoin holdings) In the last week, 80,000 Bitcoin have been reduced, and 300,000 Bitcoin have been reduced from December 9th to December 26th. It shows that the recent bargaining chips flowing into the exchange may only be short-term holders. This group may think that this wave of rise is just a rebound and is selling with the help of the rebound. Most long-term holders hold stable positions and still maintain a high willingness to hold Bitcoin.
Chart 3: Long-term holders have maintained stable Bitcoin holdings in the past two weeks, and there has been no obvious sell-off.
Chart 4: Short-term holders’ positions have dropped significantly in the past two weeks. From December 7 to December 26, they reduced their holdings by 300,000 Bitcoin, and reduced their holdings by 80,000 Bitcoin in the past week.
The third is CDD. CDD can reflect the willingness of holders to sell Bitcoin. This indicator is the product of the holding number and the holding data when the UTXO of the holder is burned. The greater the holding number, the longer the holding time, and the higher the CDD value at the time of destruction. When the value of this indicator is at a high level, it can reflect two possibilities. Long-term holders for a long time or “whales” with a large amount of Bitcoin are in a sell-off state. Therefore, we can judge the cyclical tops and bottoms of the market by observing the high and low positions of the CDD indicator value.
When the CDD indicator is at a high level, it indicates that long-term holders — or giant whales — are in a sharp sell-off stage, and the market is about to peak. Conversely, when the indicator is at a low level, it means that the role of selling at this time is mainly short-term Bitcoin holders or small retail investors. At present, the indicator is still very low, and the market sell-off has not yet arrived. The overall tone is that the market is reluctant to sell.
Chart 5: The CDD remains low, and patient investors and investors with larger positions have extremely low willingness to sell.
Looking at this from another angle, it is also clear that the market is facing a chip supply crisis. Illiquid supply refers to the amount of bitcoin in an illiquid state. It is a measure of the number of Bitcoin that have never flowed out or have flowed out in small amounts after flowing into certain addresses. These characteristics can reflect the willingness of investors in the market to hold Bitcoins. It can also indicate the scarcity of chips in the market (the number of tradable chips).
This indicates that the market pullback, smart funds are constantly collecting chips, the supply of chips on the market has dropped sharply compared to before and after “519” (May 19). The illiquid supply indicator has risen. The current number of Bitcoin held is close to 14.4 million, a record high. It is currently increasing at an average rate of 100,000 per month.
Chart 6: There is a bullish bottom divergence between the illiquid supply shock ratio and the Bitcoin price, the fundamental bullish trend remains unchanged.
Chart 7: The illiquid supply is increasing at a rate of close to 100,000 per month.
The NVT Signal indicator also points to the conclusion that BTC is underestimated.
NVT Signal (NVTS) = Network Value / 90d MA of Daily Transaction Value,
Network Value refers to the market value of Bitcoin. Transaction Value refers to the value transmitted on the payment network, which can be roughly understood as the market value corresponding to the amount of transmission that is willing to use the Bitcoin blockchain for network transmission, or understood as the fair value. Divide the two to get the ratio of market value to transmission value. If the market value is lower than this ratio, it is considered that the current pricing is lower than the pricing of network transmission generally recognized by the market, and the price is underestimated. The 90-day average is used to smooth out abnormal values.
Currently, the NVTS indicator has fallen below the normal value of -2 standard deviations. There have not been many such major downward corrections in history, and each time it has occurred, it has risen to varying degrees.
Chart 8: NVTS fell below -2 standard deviations, and the value of Bitcoin was seriously underestimated.
The number of Bitcoin flowing from miner wallets to exchanges has hit a new low since January 2021. The current indicator value is 106 (30-day moving average daily average), which is lower than the daily average selling pressure of 548 in January.
Chart 9: The selling pressure of miner wallets flowing to exchanges is very low.
The Puell Multiple indicator refers to the ratio of the value of fiat currency issued daily (mining) to the value of fiat currency issued daily in the past 365 days.
The calculation method is: =Daily Coin Issuance(USD)/MA365(Daily Coin Issuance(USD).
When this indicator is in the green area of the figure below, it means that the molecule is very small.
The reasons for the small molecules are: low Bitcoin price and few new bursts per unit of time (for example, the computing power drops rapidly in a short time but the difficulty of mining fails to drop in time. This year, this phenomenon has occurred in the removal of miners in mainland China. ), block reward halving, etc. Excluding special factors, under normal circumstances, the reason that the entire indicator enters the green zone is that the price is too low.
When the indicator is in the red zone, it is usually caused by a large numerator. The reasons are the rapid increase in prices and the rapid increase in computing power within a short period of time, resulting in an increase in blocks per unit time. Both of these situations generally occur during the bull market.
Therefore, by using the principle of the Puell Multiple indicator, we can capture the enthusiasm and downturn of miners, and use this frenzy and downturn to judge the top and bottom areas of the big cycle.
At present, the indicator is still in the middle position. This bull market has not entered the red zone so far, indicating that the big cycle is still not over, and we have not yet entered the final stage of price frenzy.
Chart 10: Puell Multiple shows that the current market is still in a normal range, and the heat has not reached the end of the cycle.
Ⅱ. Afternoon Outlook
Judging from the distribution of chips on the chain, the current Bitcoin price has a clear UTXO distribution around $46K-$48k. It shows that the valuation of the market in this area is very attractive. This price has undergone a long and strong bargaining chip exchange. The current price is slightly higher than this area, which has gained support.
Chart 11: UTXO has fully changed hands between $46k-$48K and is currently temporarily supported.
Given that the fundamentals remain healthy, this report considers this pullback to be a healthy market adjustment that does not change the long-term trend of Bitcoin. This pullback also provides a rare opportunity for layout, as the current sell-off is gradually weakening, and we continue to be bullish on the future market. At the same time, this report believes that the current indicators are still on the low side of normal and have not yet reached their most frenzied stage. Therefore, the time cycle of the current bull market is extending, and the market is expected to return to the upward track in the first half of 2022.