Bitcoin: Detailed On-chain Analysis for BTC Holders to Minimize Loss
The largest cryptocurrency in the world, Bitcoin [BTC], has had a tough patch over the past few weeks.
With a short-term weakness detected on several key coin's on-chain metrics, BTC price continues to plummet even with minimal additional sell-side pressure on-chain, Glassnode said in a statement. a new report.
According to Glassnode, all asset markets, including Bitcoin, stock markets, forex and bonds, recorded declines last week.
Affected by the decline in the financial markets in general, the continued decline in the price of BTC, despite very little selling pressure, indicates a decrease in demand for the crypto-asset and the underlying Investors are looking to exit the market at any cost.
BTC needs help
The first fundamental metric that Glassnode looks at is the Average Spending Output Life (ASOL) of the coin. According to Glassnode Academy, this metric provides insight into the lifetime of coins on a daily basis of output per transaction spent.
When this indicator posts a high value, it means that a large number of old coins are having some action. They may be realizing a profit, taking advantage of the strength of the bull market, or have reduced confidence in holding the coin.
On the other hand, when ASOL records a low value, it means that newer coins dominate daily network activity, resulting in older transaction outputs that are dormant and continued trust. The retention of a particular currency is very high.
According to its new report, Glassnode found that BTC ASOL has been steadily decreasing since the beginning of last year. While it has increased in recent weeks as a pool of old coins is spent, this is only ephemeral, Glassnode found.
Given the continued decline in price action without a high value in the ASOL, Glassnode concludes that “available demand is barely able to keep up with the daily selling pressure, let alone additional spending. profit-taking and/or surrender events have taken place. "
Glassnode also considers the number of years BTC's supply-adjusted coins have been destroyed.
Coin Destruction Date (CDD) at any given time refers to the number of coins spent multiplied by the number of days remaining unspent coins.
For the coin year destroyed index, it sums up the CDD of the coin for the last 365 days.
When this metric posts a high value and is in an uptrend, it could mean that coins that haven't been used for a long time are finally taking some action. This could lead to an increase in the supply of liquid coins.
When this metric falls, it means that long-term holders are spending less money. And, interest rates on the property are falling. This will lead to a decrease in on-chain transaction activity.
According to Glassnode, the number of years BTC destroyed coins continues to decrease, which shows that the bear market is not over yet.
Furthermore, in terms of fundamentals weakening, Glassnode sees that BTC's active entities index is currently positioned at the bottom end of the Market Channel old bear. This, reportedly means,
“There is very little growth in the active user base, and the network is currently managed by a minimal user base that we would consider lying on the ground floor. in 'historical limits'. If the active entity declines even more, it will indicate an unfortunate decline in the user base and enter an area of overall weakness that has not been seen in years. "
Aug 31, 2022