Bitcoin price has risen 40% year-to-date (YTD) and recovered to the $23,000 level. However, with the pursuit concerns around the DCG and grayscale as well as macroeconomic uncertainties, many investors doubt the sustainability of the recent price rally.
With higher prices, investors’ motivation may increase to use the current price level to exit and gain liquidity, especially after the long and painful 2022 bear market, as Glassnode explains in its report.
The well-known on-chain analytics company examines in its latest research whether Bitcoin’s recent bounce above the price it last saw before the FTX Collapse is a bullish trap or if a new bull run is on the horizon.
Bitcoin Chain Data Suggestions
Glassnode notes in its report that the recent price surge in the $21,000-$23,000 region has resulted in the recovery of several on-chain price patterns, which has historically signified a “psychological shift in the behavior patterns of holders.”
The company examines the Investor Price and the Delta Price, noting that in the 2018-2019 bear market, prices remained within the Investor-Delta Price Range for a similar length of time (78 days) as they currently do (76 days).
“This suggests an equivalence in duration pain in the darker phase of both bear markets,” Glassnodes says.
In addition to the duration component of the bottoming phase, Glassnode also points to the compression of the investor’s delta price range as an indicator of the intensity of market undervaluation. “Given the current price and the squeeze value, a similar confirmation signal will be triggered when the market price recovers $28.3,000.”
Regarding the sustainability of the current move, the analysis notes that the recent rally was accompanied by a sudden increase in the percentage of supply in earnings, from 55% to over 67%.
This sudden increase in 14 days was one of the biggest fluctuations in profitability compared to previous bear markets (+10.6% in 2015 and 8.3% in 2019), which is a bullish signal for Bitcoin.
After last year’s capitulation events, when a majority of investors were pressured into loss, the market has now moved into an “earnings dominance regime”, which Glassnode says is “a promising sign healing after the strong deleveraging pressure in the second half”. of 2022.”
Less bullish, however, is selling pressure from short-term Bitcoin (STH) holders, traditionally “an influential factor in the formation of local recovery (or correction) pivots.” The recent surge pushed this metric above 97.5% profit for the first time since its all-time high in November 2021, massively increasing the likelihood of STH selling pressure.
Long-term Bitcoin (LTH) holders rallied above the cost base at current prices after 6.5 months, which is $22,600. This means that the average LTH is now just above its breakeven base. Indeed, the current trend indicates that the trough could be in:
Given the duration of LTH-MVRV trading below 1 and the lowest printed value, the ongoing bear market has been very comparable to 2018-2019 so far.
Glassnode also indicates that the volume of coins older than 6 months has increased by 301,000 BTC since the beginning of December, proving the strength of HODLing conviction.
On the other hand, miners have taken advantage of the recent price spike to improve their balance sheet. Miners have spent around 5,600 BTC more than they have received since January 8.
In conclusion, the research firm asserts that it is not yet possible to make a definitive judgment on whether the next bull market is imminent or whether the bulls are headed for a trap:
[H]higher prices and the lure of gains after a prolonged bear market tend to motivate supply to become liquid again. […] On the contrary, the supply held by long-term holders continues to increase, which can be seen as a signal of strength and conviction. […].
At press time, Bitcoin price stood at $23.085, remaining relatively calm after the recent spike.
Featured image from iStock, charts from Glassnode and TradingView.com