On-chain data update
The technical picture for Ethereum cover in the last newsletter
remains unchanged as the runner-up crypto makes its way to $2,500 first and potentially towards $3,500 shortly thereafter. Similarly, bitcoin continues to inch towards the $70,000 level as buyers keep piling in. But what does the on-chain data tell us?
BTC held on exchanges trends lower
The number of bitcoin held on exchanges continues to decline, showing that the 'hodl' trend is still alive and strong.
While history is no guarantee, bitcoin typically does not enter the final stage of the parabola until after this trend shifts.
Adjusted SOPR shows room for growth
In bull markets, the Adjusted SOPR indicator provides insight on how much profit was realised by spent coins. If profits are taken by old coins the aSOPR will trend higher and conversely, it will trend lower when profitable coins are not sold.
- A higher aSOPR metric means that more profit is taken off the table.
- An aSOPR below 1.0 means spent coins were aggregated at a loss.
The chart above shows two observations:
Reserve risk shows hodler confidence remains high
- A relative bottom in the bitcoin price is observed each time the aSOPR trends towards one.
- Successive peaks were reducing over the last 3 months, suggesting that fewer profits were taken off the table and increasing longer-term confidence in the market. However, the trend observed a recent spike and quickly reset, potentially opening the door to a trend shift (which will need to be observed).
Reserve Risk is defined as price/HODL Bank. It is used to gauge the confidence of long-term holders relative to the price of bitcoin at any given moment. When confidence is high and price is low, the risk/reward to invest is low (i.e. the Reserve Risk). Conversely, confidence is low when prices are high and the risk/reward is unattractive at that time (high Reserve Risk).
More information on the hodler calculus is available here
, but in essence confidence remains high at the time of publishing.
At this stage
of the game, short of a cataclysmic and unexpected scenario completely resetting market dynamics, bitcoin is within a reasonable and healthy uptrend - at least when viewed within its historical context. The incoming Coinbase IPO could bring a bout of volatility due to the magnitude of the event, but in all likelihood said volatility will probably resolve in the same direction of the trend - up (only).
Bulls lead the way.
Catch you next time.