Home CryptoMarket Bitcoin price enters ‘transitional phase’ according to BTC on-chain analysis

Bitcoin price enters ‘transitional phase’ according to BTC on-chain analysis

by CryptoFan
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Bitcoin (BTC) traders’ hopeful optimism seemed to have dissipated in the first week of March as key on-chain indicators showed resistance.

now Bitcoin threatens to retest the $22,000 level and if that happens, a wave of short selling will turn a profit. I think it could go down to

Bitcoin options by strike price. Source: Coinglass.

A handful of analysts are still predicting BTC to hit $25,000 in short-term on-chain data, highlighting several reasons for price resistance at higher levels.

Realized price indicator highlights profit taking

Fed rate hikes and market participant concerns over high inflation are major macro headwinds facing Bitcoin, with investors weighing the time value (TVM) of their Bitcoin investments. To measure TVM on-chain, bitcoin holders are divided into groups based on how long they have held BTC so that acquisition costs can be averaged.

Investors who bought BTC within the last six months have benefited from the early bear market, with an average realization price of $21,000, making a profit. The average market realization price for all his BTC holders is $19,800 and is still profitable today.

Conversely, BTC held for more than 6 months has a higher realization price of $23,500 than other market groups. As Bitcoin climbs above his $23,500 mark, holders who have seen little return in TVM over six months may become anxious about securing profits, putting pressure on a breakout. there is.

Bitcoin supply cost base by holding time.Source: Glassnode

Liquidity inflows increase, but pale compared to 2022

Bitcoin price reacts heavily to interest rates and the US Dollar Index (DXY), putting a strain on risk assets. The negative effects of these factors are great for short selling, but bad for Bitcoin. The best way for Bitcoin to withstand short selling pressure is for new long liquidity and spot buyers to enter the market.

Analyzing exchange net flows is a good way to measure new liquidity, and while this metric now reflects a 34% increase from early 2023, it’s still a yearly average per day. It’s behind $1.6 billion.

Bitcoin trading volume.Source: Glassnode

Currently, the general consensus among analysts is that the ability to introduce new liquidity into the cryptocurrency market is hampered by crackdowns on banks supporting crypto-oriented businesses.

Bitcoin’s Rise in Unrealized Gains Reflects Previous Cycles

While some Bitcoin investors have realized gains, looking at the Net Unrealized Gain/Loss Indicator (NUPL) shows a positive on-chain signal. The NUPL metric shows the difference between unrealized Bitcoin profits and unrealized losses within the BTC supply.

According to Glassnode, NUPL metrics on March 6 show:

“Since mid-January, the NUPL weekly average has moved from a state of net unrealized losses to a positive state. This pattern resembles the market structure corresponding to the transition phase of the previous bear market.”

Bitcoin NUPL. Source: Glassnode

Bitcoin’s 2023 momentum may have paused in mid-February, and while many headwinds may remain, there are positive signs that the transition from the deepest stages of the Svea market is near.