Bitcoin Market Intelligence - Issue #12

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Jan Wüstenfeld
Jan Wüstenfeld
Hey everyone,
This issue will be mostly about bitcoin fundamentals, on- and off-chain. How are fundamentals developing? What is positive? What, maybe not so much? And more…
So let’s dive directly into the newsletter.
Summary:
Bitcoin percent supply last active 1+ years ago around ATH levels
Realized losses on-chain substantial this cycle
Bitcoin Exchange Balances still trending lower (at levels last seen in July 2018
Hashrate trending higher since August
Real Trading Volume picking up a bit but still relatively low compared to bull market
Value transferred on-chain low, but some increase over last week
Address Count Exchange In- and Outflows low around bear market levels, but slow down in decline
Bitcoin Percent Supply Last Active 1+ Years Ago
On the plus side for on-chain fundamentals is the supply last active 1+ years. Overall, it remains around all-time high levels at 65.764%, meaning a substantial amount of bitcoin in the network has not been moved for quite some time. Historically, that value has been trending upwards.
Particularly, in the earlier days, some of that may be related to lost coins, as around these days, it has not been that easy to store your bitcoin safely. It only has become easier over the last few years.
But it also points toward more users becoming long-term holders. Some by conviction and some newer entrants might have become bagholders as their bags are currently underwater.
For example, almost 9 million bitcoin on-chain are currently in loss. In comparison, during the last bear market at peak times on February 07, 2019, the supply in the loss was around 10.6 million bitcoin. So it is not as severe at present, but the amount of coins underwater is still quite substantial.
In any case, the supply last active 1+ years points towards fewer current coins being available to the market, which is positive.
Of course, this does not mean some of them cannot suddenly become active again if, e.g. the price starts to move significantly in either direction..
Graph 1: Percent Supply Last Active 1+ Years Ago (Source: Glassnode)
Graph 1: Percent Supply Last Active 1+ Years Ago (Source: Glassnode)
Realized Losses
The fact that bitcoin is increasingly being held does not mean that we have not seen substantial realized losses on-chain (coins being moved at a loss). On May 11, 2022, $3.3B and June 13, 2022, $4.8B have been moved at a loss, which is quite substantial. In comparison, during the flash crash on Mar 12, 2020, only $1.4B losses were realized and even less during the previous bear market.
At higher prices, realized losses naturally are higher during downturns, so a rise in realized losses over time happens by definition.
Nevertheless, overall the realized losses we have seen this cycle are quite substantial, suggesting that we have already seen significant capitulation by short-term holders in particular.
Graph 2: Bitcoin Realized Loss in USD (Source: Glassnode)
Graph 2: Bitcoin Realized Loss in USD (Source: Glassnode)
Bitcoin Exchange Reserves
Another metric on the positive side is the bitcoin exchange reserves which continue to trend downwards and currently are at levels last seen around July 2018. Some of that may be due to coins being moved to other services, such as, e.g. funds or DEXs not covered in the data. But generally, there seems to be a trend of people withdrawing their bitcoin and taking control themselves. Which is a fabulous development.
Not your keys, not your coins!
Graph 3: Bitcoin Exchange Reserves (Source CryptoQuant)
Graph 3: Bitcoin Exchange Reserves (Source CryptoQuant)
Hashrate
The third metric on the plus side is the hashrate. Considering the 30-day moving average, the bitcoin hashrate is in an upward trend since August, after it has been mainly trending downwards since mid-May. A positive sign that miners are increasingly willing to contribute to the network’s security even at current prices.
Note: I am using a moving average here as the hashrate cannot directly be observed and only be estimated, and the moving average removes the spikes that may just be due to blocks being discovered faster by chance.
Graph 4: Bitcoin Hashrate (Source: CryptoQuant)
Graph 4: Bitcoin Hashrate (Source: CryptoQuant)
Real Trading Volume
Real trading volume has also been picking up a bit lately but naturally remains below trading volumes observed during the bull market.
Graph 5: Bitcoin Real Trading Volume (Source: Messari.io)
Graph 5: Bitcoin Real Trading Volume (Source: Messari.io)
Total Transaction Value On-Chain
Considering the last year, the value transferred on-chain remains relatively low, albeit we have seen it increase a bit over the last week.
Graph 6: Bitcoin Total Transaction Value in USD 1 week cumulative, rolling (Source: ByteTree)
Graph 6: Bitcoin Total Transaction Value in USD 1 week cumulative, rolling (Source: ByteTree)
Address Count Exchange In- and Outflows
Lastly, as activity measures, the address count of exchange in- and outflows. We have both measures seen move downwards with bitcoin’s price declining. We can currently observe levels around or below levels last seen during the previous bear market. But at least at present, the two metrics are not dropping as fast anymore, so they might be close to their bottom.
Graph 7: Address Count Inflow Exchanges (Source: CryptoQuant)
Graph 7: Address Count Inflow Exchanges (Source: CryptoQuant)
Graph 8: Address Count Outflow Exchanges (Source: CryptoQuant)
Graph 8: Address Count Outflow Exchanges (Source: CryptoQuant)
In summary, on-chain fundamentals remain strong. Bitcoins continue to be held, and exchanges are still in a downward trend.
We have seen historically high realized losses on-chain, suggesting that short-term holders, in particular, have already capitulated on the downturns, which is good as those who have already capitulated cannot capitulate a second time.
This, of course, does not mean that we cannot have further capitulation spikes in the future, particularly should, given the macro situation, prices come further under pressure. The fact that a big share of bitcoin on-chain is currently at a loss provides further room for capitulation.
On the plus side for the Bitcoin network, we are seeing the 30-day moving average of the hashrate trending upwards since August.
Considering activity metrics, these continue to be at rather low levels. Depending on which one you look at, we might be seeing some pick-up, such as e.g. for real trading volume, but if at all, it is still minor. Some activity metrics may well be close to the bottom levels, such as the address count of exchange in- and outflows where the fall has slowed.
These low levels are not surprising considering the state of the market we are in. Activity will likely follow once the price picks up again significantly.
Stay safe out there! Don’t trust! Verify! Make up your own opinion and consider multiple sources. 
Jan Wüstenfeld
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This content is for educational purposes only. It does not constitute trading advice. Past performance does not indicate future results. Do not invest more than you can afford to lose. The author of this article may hold assets mentioned in the piece.
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Jan Wüstenfeld
Jan Wüstenfeld @JanWues

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