According to coinmetrics, crypto markets dropped again this past week after more news of Chinese regulation, including the PBOC telling the country’s major financial institutions to stop facilitating cryptocurrency transactions, and a Huobi derivatives ban. The markets have now been in decline for almost seven weeks following the start of the crash on May 12th.
However, even with a lack of interest by many big players in the massive intention to buy, and as we have said, on-chain indicators are showing what technical indicators cannot. For this reason it is valid to know what is behind the metrics that is really giving a positive side to what we are currently experiencing.
Low Purchase Intention
As reported criptonoticias, in a graph published by the analytical company Chainalysis, a record drop in the intensity of bitcoin (BTC) trading in the last year was recorded this Monday, June 28, a day after said indicator had reached the maximum value so far of the year.
This indicator is included in the Chainalysis market intelligence report, which compares the value of the order book of trades with the incoming flow of BTC on exchanges. As of Sunday, June 27, that ratio was 14,383, the highest level of the year, but it fell to 5,745 this Monday, according to Chainalysis.
The drastic variation of this metric could be interpreted as a sharp change in the proportion of market participants who want to buy BTC compared to those who are willing to sell. Although last Sunday there would be more participants willing to buy than those who were willing to sell, according to Chainalysis, this scenario would have been completely reversed this Monday.
However, in a personal way, this metric may reflect that we may be within a transitory period where many investors prefer to secure the earnings to accumulate at a cheaper price. If we look closely, June has represented a month of extreme accumulation after the fall in prices.
Something very interesting that coinmetrics showed in his last report was the fact that the fundamentalist metrics are in favor of a true bull cycle start. Opinion that agrees with our primary analyzes and with our personal opinion. It is only the beginning.
Coinmetrics says that every four years, Bitcoin’s supply issuance decreases by 50%. There have been three of these halvings to date, with the most recent on May 11th, 2020. Each halving has effectively signaled the start of a new cycle, with the 2013 cycle peaking 370 days after the first halving, and the 2017 cycle peaking 524 days after the second halving. We’re currently 413 days after the third halving.
In addition to that, it says that historically, MVRV has dropped below 1 between each cycle. The 2013 cycle had a double peak, with an initial peak of $ 230 in April, 9th 2013, and a second peak of $ 1,134 on December 4th, 2013.
Price dropped as low as $ 66 between the two peaks. But after the first 2013 peak MVRV dropped below 2, but never reached 1.0. After the second 2013 peak MVRV dropped below 1 for the first time on September 28th, 2014.
In 2017, BTC peaked at $ 19,640 on December 16th. After the 2017 run it dropped below 1 for the first time on June 13th, 2018.
Subsequent to that, after the last halving we saw that many had the intention of buying to maintain a long period of accumulation and retention. Nobody wanted to lose the new bullish cycle or stay out of the gold mine, but as we see we are simply in the correction of the monthly wave 2. A simple bullish start that many see as the end of the crypto market.
On the other hand and how did criptonoticias know, Regarding the so-called age or period that BTC has been withheld, Chainalysis contrasts three groups. Those BTC that have been moved in the last two weeks, those that have been held between 2 and 52 weeks, and finally, the BTC without movement for more than a year.
The graph below shows that the dominant group of BTC, 9.37 million, has not moved in more than a year, while the group that has been held more than two weeks and less than a year is 9 million BTC. Barely 330,000 BTC show retention periods of less than 2 weeks.
The percentage of variation of these groups could be interpreted as favorable to a possible upward rebound in prices, since the group of BTC held for less than 2 weeks has decreased 71% in the last 180 days, while the intermediate group has increased 21 % in the same period. Older BTCs, meanwhile, have declined in the past three months, albeit by only 6%, according to Chainalysis.