In the aftermath of an impressive three-week run, the cryptocurrency market hit a pause button.
Last week, the price of bitcoin fell back to $23,500 after breaking through the important $25,000 resistance level on Sunday night. ethereum price
Altcoins are a mixed bag. XRP
Meanwhile, in the latest on-chain report, Glassnode calls for a “dramatic” change in bitcoin’s ownership structure, with hundreds of thousands of bitcoins changing hands from long-term bitcoin holders to new investors.
Such a migration, as their analysis shows, is the canary in the coal mine that often signals the start of a structural bull market.
There are two important on-chain metrics and, probably even more importantly, the discrepancy between them that gives us insight into who the biggest bitcoin sellers have been lately.
The first is the “Long-Term Holder Cost Basis” (LTH-Cost Basis). Estimate the average price at which long-term bitcoin holders bought their coins. As of mid-July, the cost basis for LTH was $22,300, which means that even at current prices, the average long-term bitcoin holder is still high.
The second is the “Long-Term Holders Spent Out Earnings Ratio” (LTH-SOPR), which shows the amount of long-term holders’ profit or loss. understood after really selling your coins. According to Glassnode, in July, long-term bitcoin holders were experiencing an average loss of -33%.
This discrepancy between LTH-Cost Basis and LTH-SOPR tells us that the biggest sellers in this year’s loss were the ones who bought near the top and suffered some of the biggest losses.
And who did they sell to? Short term headlines.
According to data from Glassnode, since Luna
So what is essentially happening is that bitcoins are migrating from those that bought at the highs and are more price sensitive to those that bought bitcoin at recent lows and are less price sensitive.
Which is a dynamic that historically marked funds in bitcoin.
As Glassnode wrote in the note I covered in Meanwhile in the Markets last week: “For a bear market to reach an end bottom, the portion of coins that remain at a loss should be shifted primarily to those that are less sensitive to the downturn.” price, and with the highest conviction.”
Looking to the future
That said, much of the conviction that brought new bitcoin investors is largely dependent on a flurry of positive news.
On the one hand, the better-than-expected rate of inflation in July encouraged investors again, boosting most risk assets. Since mid-July, the S&P 500 and Nasdaq have risen more or less in line with bitcoin.
Earlier this year, Fidelity added bitcoin as an option to its 401k and BlackRock plans.
Meanwhile, lawmakers in the US and EU are crafting sweeping crypto legislation that will subject crypto to traditional asset regulations, potentially ultimately legitimizing bitcoin in many institutional wallets.
So if these developments do not change course, Bitcoin may make a strong comeback. On the other hand, with so much hope placed on the price, there are many things that can go wrong.
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