The Bitcoin bear market has been a rough ride for many investors, particularly those who believed that the days of such high degrees of volatility were a thing of the past. On-chain analytics can go some way into determining what exactly is happening in the markets, and Chainalysis’ tool makes this extremely easy to do. There are many indicators that one can examine on-chain, and an indicator may be more or less relevant at particular times during a market cycle depending on context.
However, some of the most interesting statistics show us that we could be potentially seeing a trend reversal, and that the market may have bottomed out already, or be close to bottoming out.
Bitcoin inflows to exchanges at highest level in 128 days
Bitcoin inflows and outflows to and from exchanges are a very important metric since one can probabilistically deduce intent from the aggregate of the inflows and outflows. If a lot of Bitcoin are being removed from exchanges and the net balance on exchanges is falling, then this is demonstrative of people wishing to hodl Bitcoin and take custody of it, rather than leave it in a place such an exchange, which is best suited only for temporary custodial solutions and for trading.
If people are not holding their Bitcoin on exchanges, and are actively withdrawing their Bitcoin from exchanges, then it shows that they do not have the intention to sell it in the short term.
The most important indicator: total Bitcoin on exchanges has fallen
Despite the inflows to exchanges being so large recently, there has actually been so much Bitcoin leaving exchanges that in total, there have been more outflows than inflows.
Although in recent weeks the number of Bitcoin being held on exchanges has been rising steadily, this trend appears to now be reversing, with a net of 3.28k Bitcoin being removed from exchanges in the past 24 hours.
Total Bitcoin moved at the highest level in 55 days
The total flow of Bitcoin, which measures how many people are being transacted on-chain in total, has reached its highest level in 55 days. This means that the total amount of Bitcoin that is being moved is on the rise.
Over the last seven days, a total of 266.44k Bitcoin has been moved.
Is the bear market almost over?
On-chain analytics is more focused on examining trends that have occurred in the past and may be occurring in the present and cannot accurately predict the future. Those who relied too heavily on the models of Plan B and other on-chain analysts would have found themselves in undesirable positions with their bags underwater, particularly those who took out a high degree of leverage.
In the world of DeFi, it is quite easy to see how much leverage one has taken out on-chain, but it is far more difficult to know this in the opaque world of traditional finance and CeFi. It is quite possible that there are more companies, firms, HNWIs, and institutions that are yet to be liquidated, and this could drive prices down further. It is also possible that there are market participants who are taking on leverage at these low levels, believing that the bottom is in.
Despite the price action, the Bitcoin markets have recently been replete with positive news. The hash rate has reached all-time highs, more banks are offering Bitcoin to clients, more countries are adopting the Bitcoin standard, and central banks continue with their irresponsible quantitative easing programmes as governments continue with their plans for the greatest of Bitcoin advertisements: CBDCs.
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