Bitcoin Weekly Analysis: July 4th — 10th
After observing market trends over the previous week, we believe that the short-term price recovery we saw will continue over the medium term, as Bitcoin’s is severely oversold. On-chain data has remained in a healthy state. The current market price has fallen into the shutdown currency price area, which has historically indicated the bottom of the market’s capitulation. Technical indicators also point towards buying signals, and the bottom contour of the market appears to have arrived.
Centralized exchanges continued the trend of net withdrawals last week. From July 2 to July 9, the BTC balance on exchanges decreased from 2.413 million to 2.385 million, with a net withdrawal of more than 28,000 coins in a single week. The number of Bitcoins in stock has re-entered a downtrend.
The total amount of illiquid supply exceeds 14.66 million, and there is a trend of accelerated increase with this. At present, the ratio of illiquid supply to the total circulation is above 76.8%, as Bitcoins continue to flow out of the market and enter the hands of HODLers.
The proportion of long-term holders of HODL Waves for more than 6 months has reached 75.6%, and 2/3 of the issuance has not moved for more than half a year, which reflects that most long-term holders are not willing to stay at the current price. The HODLers are among the most significant forces behind the current market.
Events in America
On Friday, the U.S. released a strong jobs report. Non-agricultural jobs in June exceeded expectations with an increase of 372,000, and the unemployment rate remained at 3.6%. Average hourly wages increased by 5.1% year-on-year, slightly higher in comparison to the expected 5.0%. The U.S. labor market remains strong, raising the market’s odds of a 75 basis point rate hike by the Federal Reserve in July, and the U.S. dollar index jumped above 107. The decisions being made short term to ease pressure on the U.S. economy appear to be alleviating some of its stresses, however it’s a long game to see what its full impact will be.
The Relative Strength Index — Lower than ever
From the perspective of longer-term technical trends, the monthly RSI has fallen to the lowest level in history, having fallen below 45 to around 41 currently. This has never happened in the history of Bitcoin, and is a clear indication that the market is severely oversold and is in a long-term bottom area.
Bitcoin’s Availability Continues To Fall
As mentioned, centralized exchanges continued the trend of net withdrawals last week. From July 2 to July 9, the BTC balance of the exchange decreased from 2.413 million pieces to 2.385 million pieces, net withdrawal of more than 28,000 pieces in a week. Due to the recent on-chain liquidation and the failure of many platforms, the market demand for self-custody has increased significantly. In addition, the recent low price of BTC has also attracted a number of investors to buy bitcoin. The amount of bitcoin on exchanges has resumed its downward trend, and hit a three-year low last week.
With the gradual decrease of the remaining BTC in exchanges, Bitcoins available for trading in the market are becoming more scarce. This means that a large number of BTC have entered a state of low liquidity, or total illiquidity. The total volume of Illiquid supply of BTC is over 14.66 million pieces, and this trend is accelerating. The ratio of Illiquid supply to total circulation currently exceeds 76.8%.
In the long term, this will further weaken the market selling pressure on Bitcoin, which means less supply. In the long term though, the demand side is strengthening, which will be positive for price.
Dormancy — A Bull Market Catalyst?
There are a lot of Bitcoins in Dormancy, meaning they are not actually in circulation. As a result, the flow index of dormant Bitcoins held by entities is at a new low. When large amounts of Bitcoin are not moved on the chain or traded on exchanges, it means that most of the coins are held by long-term holders, making tradeable chips even more scarce.
While the fall in Bitcoin’s price has been volatile, the market is dominated by chips held by short-term traders and a small proportion of long-term holders, which account for a small percentage of the total number of coins in circulation. Therefore, as long as the market digests some of the selling pressure and puts it into a “cold storage” state, the market chip structure will become more unbalanced, which will lay a solid supply and demand foundation for the future bull market.
We believe that the short-term price recovery will continue due to the severe oversold. The on-chain data has remained healthy. The current market price has fallen into the shutdown price area; historically, the shutdown price area is usually the market surrender bottom. There are many trends we are also seeing that are building the foundations for a more solid bull market in the long term. For now though, Bitcoin must continue to weather the many storms it is currently facing, whilst keeping an eye on these fundamentals that will bode in its favor eventually.
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