Strategic Insights on Bitcoin's 72K Ascendancy

Introduction

Bitcoin's remarkable rise from $60,000 to $72,000 underscores the essential role of on-chain metrics in deciphering and forecasting market movements. By examining crucial indicators such as Hash Ribbons and the 90-Day Moving Average of Coin Days Destroyed (CDD), we gain profound insights into Bitcoin's market dynamics. This analysis emphasizes the necessity of ongoing monitoring and expert evaluations, such as those provided by 0nchained.

After closely monitoring key indicators to understand market dynamics, we will now analyze the activity of address cohorts. This analysis will focus on the average holding period of Bitcoins and the quantity of Bitcoin held by these cohorts.

I . Bitcoin Hash Ribbons

Definition and Significance

Hash Ribbons serve as a vital indicator of miner behavior. They reveal periods when miners capitulate (shut down their operations due to unprofitability) and when they recover (restart operations). This metric is instrumental in predicting market bottoms and subsequent recoveries.

Mechanics of Hash Ribbons

Moving Averages: The Hash Ribbons indicator relies on the 30-day and 60-day moving averages of Bitcoin's hash rate.

Capitulation and Recovery Signals: When the 30-day moving average falls below the 60-day moving average, it signals miner capitulation. Conversely, a crossover above indicates recovery, often preceding price rebounds.

he accompanying chart illustrates Bitcoin's price movements alongside the Hash Ribbons. Key observations include:

Periods of Capitulation and Recovery: Noticeable periods where the 30-day moving average dips below the 60-day average, marking miner capitulation. These periods typically precede significant price recoveries.

Current Trends: Early 2023 shows a capitulation phase, followed by a recovery, aligning with Bitcoin's recent surge to $72,000. This reinforces the reliability of Hash Ribbons in forecasting market bottoms.

This month, a crossover of the Hash Ribbon indicator has been observed, signaling a buy opportunity and suggesting further price appreciation.

  II . Coin Days Destroyed (CDD) - 90-Day Moving Average

Understanding Coin Days Destroyed

CDD is a crucial metric that tracks the activity of long-term Bitcoin holders. It measures the number of "coin days" destroyed when Bitcoins are moved after being held for a period. This metric provides insights into the behavior of long-term holders.

Calculation and Implications

CDD Calculation: CDD is calculated by multiplying the number of Bitcoins moved by the number of days they were held.

Market Sentiment Indicator: High CDD values suggest significant movement by long-term holders, often preceding major price changes. A decrease in CDD implies reduced activity from long-term holders, signaling confidence in the current market trend.

The chart showcasing CDD alongside Bitcoin's price offers the following insights:

High Activity Periods: Spikes in CDD correlate with major price movements, indicating activity among long-term holders.

Recent Trends: The 90-day SMA of CDD has risen in 2023, showing increased activity. However, recent declines in CDD suggest reduced selling pressure, aligning with Bitcoin's bullish momentum and indicating sustained confidence among holders.

III . Short-Term Holders Realized Price to Price Ratio (STH RP/PR)

Introduction to STH RP/PR

The STH RP/PR is a newly developed indicator that highlights potential buying opportunities during bull markets. It compares the daily realized price changes of short-term holders to the current market price.

Operational Mechanics

Indicator Calculation: STH RP/PR is determined by the daily change in the realized price of short-term holders relative to Bitcoin's current price.

Buy Signals: Negative STH RP/PR values indicate that short-term holders are selling at a loss, marking potential buying opportunities in bull markets.

Negative Values as Buy Signals: Several instances of negative STH RP/PR values in 2023, which correspond to subsequent price increases, affirming the indicator's utility in identifying buying opportunities during bull markets. During the correction from $60,000 to $56,000, the STH RP/PR indicator turned negative, signaling another buy opportunity.

In this report, we will also analyze Bitcoin address cohorts to gain a deeper understanding of their behavior and the potential investment opportunities they present. Our analysis will focus on:

Supply Held in BTC: The amount of Bitcoin each cohort holds.

Average Acquisition Price (Realized Prices): The average price at which these addresses acquired their Bitcoin.

Realized Capitalization: The total value of Bitcoin held by these cohorts based on their acquisition prices.

Unrealized Profit and Loss: The potential gains or losses these addresses would incur if they sold their Bitcoin at the current market price.

By examining these indicators, we aim to uncover valuable insights into the actions and strategies of key Bitcoin address cohorts, which include:

• New Whales: Addresses holding more than 1,000 BTC with an average coin age of less than six months.

• Old Whales: Addresses holding more than 1,000 BTC with an average coin age of more than six months.

Understanding the behavior of these significant address cohorts can provide insightful information for investment strategies in Bitcoin, guiding informed decisions based on comprehensive on-chain data analysis.

IV . Analyzing New Whales Addresses

New Whales are addresses holding more than 1,000 BTC with an average coin age of less than six months. According to the chart, the supply held by new whales has shown notable trends:

Supply Trends

As of May 2024, new whales hold approximately 1.2 million BTC, up from around 200 thousands BTC in January 2023. This reflects a significant accumulation trend, indicating active buying and holding behavior and growing confidence in Bitcoin's future price potential.

Average Acquisition Price (Realized Price)

The realized price for new whales represents the average price at which these large investors have purchased Bitcoin. It's an on-chain metric that helps to understand the cost basis of significant market players.

Tracking the realized price can provide insights into the buying behavior and sentiment of new whales. When the realized price is identified around a specific level (e.g., $60,000), it indicates that on average new whales have entered the market around this price.

In January 2024, the SEC approved a Bitcoin spot ETF. This event had a significant impact on the market, as evidenced by the behavior of new whales (large investors) accumulating Bitcoin. The chart demonstrates how the realized price (average acquisition price) of new whales has increased alongside the rising Bitcoin price.

New whales likely speculated that the ETF approval would lead to substantial inflows into the Bitcoin market, driving up the price. Their purchases at higher prices reflect this speculation.

The realized price for new whales has been rising, reaching around $61,000 in May 2024, compared to approximately $27,000 in January 2023. This suggests that new whales are buying Bitcoin at increasingly higher prices, underscoring the bullish sentiment among new investors who are confident in Bitcoin's upward trajectory.

Realized Capitalization

Realized capitalization (realized cap) is a metric that values Bitcoin based on the price at which each coin last moved, rather than its current market price. This gives a measure of the total cost basis of all coins in the market.

Calculation: To compute the realized cap, each Bitcoin's value is considered at the price it was last transacted on-chain. Unlike market cap, which multiplies the current BTC price by the total supply, realized cap uses historical transaction data to provide a more nuanced view of the capital actually invested in the network.

The provided chart illustrates the realized cap of new whale addresses, showing a steady increase over time. Let's delve into why this is happening:

The realized capitalization for new whales has increased significantly, from $5 billion in January 2023 to approximately $100 billion in May 2024. This highlights active accumulation and significant capital inflows into Bitcoin from new large investors, reinforcing the bullish outlook as new whales continue to invest heavily in Bitcoin.

These whales are rapidly accumulating Bitcoin around the $60,000 mark, with their average acquisition price reflecting this strategic buying behavior.

Unrealized Profit and Loss

Unrealized profit and loss reflect the potential gains or losses if new whales were to sell their BTC at the current market price. This metric provides a snapshot of market sentiment and potential future price movements.

The chart shows that unrealized profits for new whales have been increasing, reaching a peak around $18 billion in April 2024. This indicates that these investors are in a profitable position, suggesting strong holding behavior as new whales are likely to continue holding their BTC in anticipation of further price increases.

When Bitcoin's price fell below the average acquisition price of the new whales cohort, we observed that they were experiencing unrealized losses.

V . Analyzing Old Whales Addresses

Supply Trends

Old Whales are addresses holding more than 1,000 BTC with an average coin age of more than six months. The supply held by old whales provides insight into the long-term holding behavior of significant market participants. 

The supply held by old whales has remained relatively stable around 3.6 million BTC, indicating a strong holding behavior. This stability suggests that long-term investors have confidence in the market's future potential.

Average Acquisition Price (Realized Price)

The realized price for old whales gives insight into the average cost basis for these long-term holders.

The chart shows that the realized price for old whales has been relatively steady. This indicates that long-term investors have maintained their positions without significant changes in their acquisition costs.

Realized Capitalization

RC reflects the total cost basis of all coins held by a specific cohort of addresses, in this case, old whales. 

For old whales, the realized cap represents the cumulative value of their holdings based on historical transaction prices, providing insight into their investment behavior over time.

The realized cap of old whales has remained relatively steady, fluctuating around $70 billion.

The realized capitalization for old whales has shown a steady increase since January 2023, reflecting the ongoing confidence and continued investment by long-term holders.

Unrealized Profit and Loss

Unrealized profit and loss for old whales provides a snapshot of the potential gains or losses if these holders were to liquidate their positions.

The chart illustrates that unrealized profits for old whales have been substantial, indicating that long-term holders are in a strong profit position. This reinforces the idea that old whales have confidence in the long-term potential of Bitcoin and are likely to continue holding.

VIII . Conclusion

The recent price surge of Bitcoin to $72,000 can be largely attributed to the strategic behaviors of different address cohorts, particularly the accumulation trends observed among new whales and large holders. The substantial increase in supply held, coupled with the rising average acquisition prices and growing realized capitalization, reflect a robust confidence in Bitcoin's long-term potential.

One of the key reasons Bitcoin's price has consistently found support at $60,000 is the significant buying activity at this level, especially by new whales and large holders. These cohorts have been actively accumulating Bitcoin, driving up the realized price and reinforcing this price level as a strong support. The unrealized profits among these cohorts also indicate a profitable position, suggesting that these holders are likely to continue holding rather than selling, thus preventing the price from dropping below the $60,000 threshold.

Overall, the on-chain data provides compelling evidence of strong market confidence and strategic accumulation by key Bitcoin holders, which supports the sustained upward momentum in Bitcoin's price and its resilience above critical support levels.

0nchained envisions a future where blockchain technology serves as the cornerstone of financial innovation and transparency. Our mission is to empower investment banks, cryptocurrency companies, traders, and investors with unparalleled insights into the blockchain universe through advanced on-chain analytics.

We are committed to fostering a world where data-driven decisions drive trust, security, and growth within the digital asset ecosystem.

Our vision is to be the trusted partner in unlocking the full potential of blockchain through innovative, reliable, and comprehensive on-chain analysis, paving the way for a more inclusive, efficient, and decentralized financial world.