Bitcoin on the brink? On-chain analysis of Bitcoin (BTC)

Following the failure of the bullish recovery that occurred last week, the price of BTC returns to visit the lower limit of the demand zone located between $18k and $24k. As investors continue to dole out, signaling their wariness of bitcoin’s price in the near term, we explore key levels to watch for a bearish continuation. Onchain analysis of the situation.

BTC returns to test the bear market floor

Following thebullish recovery failure occurred last week, the BTC price returns to visit the lower limit of the demand zone located between $18k and $24k.

After taking advantage of the rise in August to exit the market, participants provoke a new wave of distribution as the price approaches the bear market floor established on June 18, 2022.

BTCUSD 300822

Figure 1: Daily price of BTC

This week, in considering the possibility that the price invalidates the $18k levelwe will observe:

  • the distribution behavior some participants ;
  • them key levels to monitor in the event of a bearish continuation.

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Suspicion and dead cat bounce

While we identified a underlying weakness of bullish recovery as of mid-July, we now have plenty of data allowing us to confirm this observation and better understand the recent decline in BTC.

the Accumulation Trend Scorepresented below, is a meaningful tool for identifying the accumulation/distribution trends of market players.

Calculating the daily change in the balances of different cohorts of portfolios, it displays a value close to 0 when participants distribute and one score tending to 1 when participants favor accumulation.

What should be emphasized here is the fact that this indicator has been printing values โ€‹โ€‹below 0.05 since mid-August, signaling a strong distribution and a lack of investor confidenceas described in our previous analyses.

BTC Score Accumulation 300822

Figure 2: Accumulation Trend Score

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Moreover, we can notice through the use of the short-term holders profitability ratio (STH) that participants did indeed take advantage of the rise in July – August to exit the market by closing positions close to their cost base, realizing modest profit/losses.

Short-term holder profit-taking episodes are highlighted in red on the following chart. They make it possible to draw a parallel between the bullish rallies of March – April and July – August, both giving rise to bearish reversals in the price.

BTC STH SOPR 300822

Figure 3: STH Expenditure Profitability Ratio

This behavior is often associated with dead cat bounce events, where participants use a brief price relief to exit the market by limiting their lossescausing a rapid exhaustion of the bullish move as a result of the selling pressure and the lack of sufficient buying pressure.

A similar dynamic is observable within the cohort of long-term investors (LTH)although the profitability of their spending tends to fall as the bear market unfolds.

Indeed, we can detect a spending trend over the same periods, with the cohort taking advantage of increases to:

  • make big profits in March – April ;
  • achieve limited losses in July – August.

BTC LTH SOPR 300822

Figure 4: LTH Expenditure Profitability Ratio

This way of leaving the market, recognizable within the two cohorts, confirms the lack of confidence and patience of some participants regarding short-term market action and contrast the HODLing behavior identified since the beginning of August.

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Price levels to watch

Now that we’ve identified participants’ spending behaviors and the potential selling pressure that comes with it, try to determine the price zones to which the course could react if the downtrend continues.

By consulting theGDPR, we can see that the price is currently near the bottom of the reaccumulation zone identified two weeks ago. As long as the price is hovering within this zone, between $18k and $24k, the odds of a bear market floor forming increase.

However, it is worrying to note thatonce the $17k – $18k milestone is crossed, the volume clusters that can act as downside resistance are almost non-existent. Bitcoin is today on the edge of an abyss that we must look at with calm and pragmatism.

Furthermore, the price range between $21k and $24k has a non-negligible chance of serving as short-term resistance for the price reboundparticipants can take advantage of a new bullish surge to jump ship and recover their capital.

BTC URPD 300822

Figure 5: Distribution of UTXO Realized Prices

Thus, in the event of a bearish continuation, different models of on-chain supports allow us to anticipate the price levels to watch.

The following graph highlights :

  • the realized price ($21.6k)already invalidated and indicating that the market is in a state of overall undervaluation;
  • the balanced price ($17k)tested for the first time on June 18, 2022 and having temporary support at the price floors of previous down cycles;
  • the Delta price ($13.6k)serving asultimate rampart to the volatile wicks of bear cycles and providing a painful albeit realistic price target.

In order to reach this last level, the price of BTC will still have to suffer a fall of around 30%.causing a total exhaustion of the selling pressure stored up by investors and signaling a historic buying opportunity.

BTC Model Price 300822

Figure 6: On-Chain Support Models

While this price level may be surprising to some, the on-chain analysis tool WhaleMap provides a price model based on address cohortsoffering an alternative and relevant prism to the data provided by Glassnode.

Looking at the realized price of addresses holding 10-100 BTC, we can notice that in all previous bearish cycles, BTC price has come looking for this area and using it to establish a robust price floor.

BTC rPrice 10 - 100 BTC 300822

Picture 7 : Realized Prices of Cohorts of Addresses

Currently hovering around $12.7k, this indicator signals that a potential bearish movement could take us towards the $13k price zone where the bear market could find and work its final bottom, before giving rise to the coming bull market.

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Summary of this onchain analysis

Ultimately, Although this week’s data paints a fairly pessimistic picture of the situation in the short term, the bear market floor located at $17.8k remains intact to datedespite the fact that the macroeconomic context and the behavior of the participants prove to be deleterious.

Since mid-August, investors started a strong distribution, showing their distrust of the short-term future of the priceaccompanied by sales behavior that led to the dead cat bounce scenarios of May – April and July – August 2022.

Finally, a cross-study of historical support models using Glassnode and WhaleMap data allows us to identify a Target potential bear market floor around $13k, pointing to a possible price drop of around -30%.

Sources โ€“ Figures 2 to 6: Glassnode; Figure 7: WhaleMap

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