In its statement, cryptocurrency analytics firm Glassnode said in the wake of a one-month explosive surge, “Bitcoin on-chain cost – consolidating above multiple cohorts.” Latest weekly on-chain newsletter, As a result, this has “put the average BTC holder in a regime of unrealized gains, and demonstrates a potential turning of the macro market tide,” claims Glassnode.
One way to represent this return on profitability is through the 7-day exponential moving average (EMA) of Glassnode’s Realized Profit/Loss Ratio indicator. “We may be witnessing the first sustained period of profitability since the April 2022 exit liquidity event, with early signs of a shift in the profitability regime,” Glassnode said, citing the chart.
According to Glassnode, if the realized P/L ratio (7-day EMA) falls below 1.0 with prices at current levels, it would indicate a large increase in realized loss dominance, which can only happen if investors are Expenses have increased. Received your coins on a high cost basis.
Unrealistic profitability momentum approaching a tipping point
Glassnode also highlights a second indicator that drives home a similar point. Glassnode’s net unrealized profit/loss ratio (NUPL) “shows that the recent rally has launched the spot price of Bitcoin above the average acquisition price of the broad market,” he observes. “This puts the market back in the regime of unrealized gains, where the average holder is back in the green”.
Glassnode notes the historical similarity between the recent market cycle and previous bear market periods where NUPL was negative for long periods of time. NUPL turned negative for 166 days in the current cycle, as against 157 days in 2011-12 and 134 days in 2018-19. However, this does not mean that NUPL cannot remain negative for much longer – in 2015-16, it was negative for 301 days.
Before introducing a new indicator called Relative Unrealized Profitability Momentum, Glassnode states, “The ratio between the total current unrealized profit retained by the market and its annual average … can provide a macro scale indicator of a recovering market.” Is.”
According to the crypto analytics firm, “this momentum metric is now approaching the equilibrium break-even point and is similar to the recovery from the 2015 and 2018 bear market years”. Glassnode states that “confirmed breakouts above this equilibrium point have historically coincided with transitions in macro market structure”.
HODLer’s dominance is fading, suggesting the capitulation phase is over
Recent price recovery in of bitcoin Return to value and profitability for the majority Bitcoin The market coincided with a small but meaningful decline in the dominance of bitcoin holders. This can be demonstrated through Glassnode’s Actual Cap HODL wave chart, which shows the percentage of bitcoins that moved less than the previous three-month low and the most recent 2022 end-of-cycle low of around 12%. Few percent were recovered from.
Bitcoin bull markets are typically characterized by an increase in dominance of “young” bitcoin (i.e. coins bought from HODLers by new investors), while bitcoin bear markets are characterized by an increase in dominance in the percentage of coins that haven’t moved. . Sometime. Referring to the recent bounce from lows, Glassnode said that “the depth of this inflection point is consistent with historical precedent”.
Glassnode offers a slightly more informative indicator called the Actual HODL ratio. “This metric compares this balance of money held between 1-week and 1y-2y old coins, producing a macro scale oscillator”, he explains. indicate disproportionate wealth” and “low” values indicate disproportionate wealth held by long-term, high-confidence HODLers”.
The crypto analytics firm observed that the true HODL ratio is currently experiencing a downward pattern, indicating that there is a net transfer of wealth from HODLers to new investors.
“Signs of Complete Detoxification of Euphoria” Mean Bear Market May Be Over
In light of the above evidence that the bitcoin market has returned to net profitability and wealth may begin to shift from HODLers back to new investors, Glassnode states that “there are signs that euphoria has been fully detoxed, and a cyclical Infection may occur”.
Indeed, as discussed in a separate article, seven of the eight technical and on-chain indicators tracked by analysts at crypto analytics firm Glassnode “Recovering from Bitcoin Bear” Dashboard Separately, another leading on-chain indicator tracked by crypto analytics firm CryptoQuant called the Profit and Loss (PnL) Index has just sent a definite buy Hint for the first time since 2019,
Positive on-chain and technical signs come as bitcoin adoption by the wider population continues, with the number of wallet addresses with non-zero balances likely to hit soon a new record high, Meanwhile, analysis of bitcoin’s long-term market cycles, such as one of the recent threads @CryptoHornHairs and according to Bitcoin’s stock-to-flow pricing modelsuggest that the cryptocurrency may be in the early stages of a multi-year bull market.
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