Source: Glassnode
Translated by: [Your Name]
Abstract
Despite Bitcoin prices trading sideways or declining, a significant portion of the market remains profitable, with short-term holders bearing the brunt of the losses. By combining on-chain pricing models and technical indicators, we explore the future market outlook. Volatility continues to historically compress, indicating investor sentiment is indifferent but hinting at potential future increased volatility. Market profitability remains strong, with a majority of investors still holding profitable positions even as Bitcoin prices dipped into the $60,000 range, causing fear among many digital asset investors. Such indifference during stagnant market volatility is not uncommon, as apathy tends to gradually spread. Nevertheless, from the perspective of MVRV ratio, overall investor profitability remains robust, with an average profit of 2x per coin still held. This metric typically distinguishes between phases of “enthusiastic” and “frenzied” bull markets.
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By segmenting all holdings into unrealized profits or losses, we evaluate the average cost basis of each group and the average magnitude of unrealized profits and losses per coin.
Coins holding unrealized profits average $41.3k in unrealized gains against a cost basis of approximately $19.4k. It’s noteworthy that this data may be skewed by coins transferred during earlier cycles, including entities like Patoshi, early miners, and lost coins.
Coins holding unrealized losses average $5.3k in unrealized losses against a cost basis of approximately $66.1k. These coins are primarily held by short-term holders, as few “top buyers” from the 2021 cycle continue to hold.
These metrics help identify potential points of selling pressure, as investors seek to realize their gains or avoid further unrealized losses.
Live Workbench
By examining the unrealized profit/loss ratio per coin, we observe that the magnitude of paper profits is 8.2 times that of paper losses. Only 18% of trading days recorded larger relative values, all indicating that we are in a frenzied bull market phase.
It can be argued that March’s all-time high (ATH) aligns with several characteristics following ETF approval and historical bull market peaks.
Live Workbench
Determining Position in the Cycle
Bitcoin prices have consolidated within the $60,000 to $70,000 range since March’s ATH, with investor sentiment leaning towards indifference and boredom. This has led to hesitancy among most investors, preventing the market from establishing a robust trend.
To determine our position in the cycle, we reference a simplified framework for historical Bitcoin market cycles:
– Deep bear market: prices below realized prices
– Early bull market: prices between realized prices and true market averages
– Enthusiastic bull market: prices between ATH and true market averages
– Frenzied bull market: prices above the previous cycle’s ATH
Currently, prices remain in the enthusiastic bull market phase, having briefly entered the frenzied zone only a few times. The true market average stands at $50k, representing the critical pricing level for sustaining a macro bull market.
Live Workbench
Next, we examine the cohort of short-term holders and overlay their cost basis with levels at plus or minus one standard deviation. This provides areas where these price-sensitive holders may begin to react:
Significant unrealized profit signals a potential overheated market, currently valued at $92k.
The breakeven level for the short-term holder cohort is $64k, with the spot price currently below this level but attempting to reclaim it.
Significant unrealized loss signals a potential oversold market, currently valued at $50k, aligning with the true market average as a bull market delineator.
It’s notable that only 7% of trading days recorded spot prices below the -1 standard deviation band, a relatively uncommon occurrence.
Live Workbench
As prices dip below short-term holders’ cost basis, it’s essential to assess the financial pressures within this group’s different subsets. By age segmentation, we can dissect and examine the cost bases of different age cohorts within the short-term holder group.
Currently, coins held for 1 day to 1 week, 1 week to 1 month, and 1 month to 3 months are averaging unrealized losses. This suggests little productivity within this consolidation range for traders and investors.
The 3-month to 6-month cohort is the only subset still holding unrealized profits, with an average cost basis of $58k. This aligns with the price low of this adjustment, once again marking it as a critical area of interest.
Live Workbench
Turning to technical indicators, we utilize the Mayer Multiple to assess the ratio of price to the 200-day moving average (200 DMA). The 200 DMA typically serves as a straightforward indicator for evaluating bullish or bearish momentum, marking any breakthroughs above or below as critical market pivot points.
The current value of the 200 DMA is $58k, once again converging with on-chain pricing models.
Live Workbench
We can further evaluate supply concentration around specific cost basis clusters using the URPD indicator. Currently, spot prices are approaching significant supply nodes between $60k and $70k. This aligns with the short-term holder cost basis model.
Currently, 2.63 million BTC (13.4% of circulating supply) are within the $60k to $70k range, with minor price fluctuations significantly impacting the profitability of coins and investor portfolios.
Overall, this suggests many investors may be sensitive to any price drops below $60k.
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Expectations for Volatility
After months of ranging price movements, we note a significant decrease in volatility across multiple rolling window timeframes. To visualize this phenomenon, we introduce a simple tool to detect periods of realized volatility compression, often indicating an impending increase in volatility.
The model assesses 30-day changes in realized volatility across 1-week, 2-week, 1-month, 3-month, 6-month, and 1-year timeframes. A signal is triggered when all windows show negative 30-day changes, inferring volatility compression and reduced expectations of future volatility among investors.
Live Workbench
We can also evaluate market volatility by measuring the percentage range of highest and lowest price fluctuations over the past 60 days. According to this indicator, volatility continues to compress to rare levels, typically preceding significant market movements after extended periods of consolidation.
Live Workbench
Finally, we enhance volatility assessment using the seller risk ratio. This tool evaluates the absolute sum of realized profits and losses locked by investors relative to the asset’s scale (realized market value). We consider this indicator within the following framework:
– High values indicate significant coins are spent at substantial profit or loss relative to their cost basis. This situation suggests the market may need to find balance again, often after high volatility price swings.
– Low values indicate most coins are spent near their breakeven cost basis, suggesting a degree of balance within the current price range and describing a low volatility environment.
It’s notable that the short-term holder seller risk ratio has shrunk to historic lows, with only 274 of 5,083 trading days recording lower values (5%). This indicates a degree of equilibrium has been established during this price consolidation period, implying heightened expectations for high volatility in the near term.
Live Workbench
Summary
The Bitcoin market is at an intriguing stage where despite trading 20% below its ATH, apathy and boredom dominate. On average, each coin still holds 2x unrealized profits, but new buyers are in loss positions. We also explore key factors that could shift investor behavior. We seek a fusion of on-chain and technical indicators and identify three critical areas of focus.
Breaking below $58k to $60k would put a large number of short-term holders into losses, below the 200 DMA price level.
Fluctuations between $60k and $64k continue the current consolidation trend.
A breakthrough above $64k would restore profitability for many short-term holders, potentially lifting investor sentiment.
Volatility continues to compress across multiple timeframes, whether viewed from pricing or on-chain data perspectives. Indicators like the seller risk ratio and 60-day price range have fallen to historic lows, suggesting the current trading range is in the latter stages of expanding into the next range.
