On-chain data shows that Bitcoin is seeing a strong rebound, both in terms of hashing power and fundamentals. Is the market preparing for an explosive second half of 2021?
Let’s dig in.
The BTC hash rate will recover when the miners leave China
The bitcoin hash rate is steadily increasing as miners fleeing China turn their assets back on. Since the June low of 84 exahashes per second (EH / s), the hash rate has increased by 50%, underscoring the fact that Bitcoin ultimately knows no hostile country regimes.
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BTC balance on the exchanges is trending lower
On-chain data is useful for contextualizing price actions, which in turn provides the basis for price expectations, depth of potential retracements, and general market health.
From August 30, the Bitcoin balance on the stock exchanges will make new lows.
The data suggests that investors and traders are withdrawing liquidity from the market and storing it in cold stores, where those bitcoins are less likely to be spent. In other words, more Bitcoin outside of the exchanges means less pressure to sell.
If the trend continues this is pretty bullish and helps limit potential downside scenarios.
USDT (Tether) account balance on the exchange is ticking higher
At the same time, USDT is ticking higher. In particular, on August 23, the Tether balances on the exchanges rose from 4.8 billion US dollars to 6.7 billion US dollars the next day.
One explanation could be that investors paid off their positions in the stablecoin at the $ 50,000 mark. While that’s likely part of the explanation, USDT isn’t just sitting on the exchanges, it’s actively growing.
The graph above shows the net change in position of USDT across all exchanges, which averages nearly $ 2 billion in net inflows per day.
It’s dry gunpowder.
Long-term investors are doubling
Eventually, Bitcoin holders are also doubling.
When the Bitcoin holder’s net position change is negative, it is said that long-term investors are selling. But when the net change in position becomes positive, long-term investors will acquire Bitcoin.
As you may have noticed, these results seem to contrast with the last newsletter in which we discussed the prospect of a self-detachment at the beginning of a new month due to the weakness of traditional markets.
Since then, BTC / USD has dropped to $ 46,300, only to drop back to $ 49,600 days later before cooling down again. While a period of consolidation may still be in play, the $ 46,000 line still stands as support at the time of writing.
Price action and on-chain data are also starting to resemble previous periods of accumulation as the market prepares for the next higher leg. We observed relatively choppy price movements from August to September 2020, in which market participants both amassed Bitcoin and smuggled stablecoins onto the exchanges to inject capital into the market.
As such, this is not so much a change in bias as a realization that the data on the chain does not suggest that the bull run is over. On the contrary, it shows the optimism and market readiness of investors for Bitcoin and cryptocurrencies.
Technically, $ 46,000 remains the line in the sand for short-term gains, with $ 49,000 offering low time frame resistance. When it is captured, the final block of sales that marked the pivotal moment of the market turnaround in May will be open for trading. In all respects, $ 57,200 is the final level of resistance before new all-time highs. When this block of orders is finally captured, the first take profit range would be the 1,618 Fib expansion level which is at $ 88,000. I assume that this number will be the minimum price target for the end of the year.
The bullish medium term outlook will be faltered if key January support at $ 42,100 and the psychological level of $ 40,000 fail to sustain prices in the event of a sell-off.
In either case, the evidence on the chain backs up the case for continuation at the time of writing. This may change in the future so it is important to watch the markets and stay informed.
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