The Bitcoin market is currently indecisive on a bullish or bearish path, and this may exacerbate crypto volatility, says Glassnode analysts in their Monday analysis of the BTC on-chain activity.
Even as the market continues to ponder the Grayscale GBTC unlock, the Purpose ETF product and over-the-counter inflows went down last week, which suggests low institutional demand.
A case for the bulls
The dollar-cost averaging – a method of slow investment where people purchase small quantities each time and over a long period – is growing stronger on the BTC network, even as more people continue with the HODLing ideology. This may push the BTC bullish trend in the coming few weeks and months according to the analysts.
“If we observe the volume of supply held by ‘strong hands’, we can see that HODLing appears to be the preferred strategy. Long-Term Holders currently hold 75% of the circulating supply (6% at a loss, 69% in profit).”
This holding trend may continue for about two months if the current trend continues.
“If the current rate of coin maturation (14.75k BTC/day) persists, long-term holders would hold 80% of the coin supply in around 2-months, although this is not likely to play quite so cleanly, since we know many coins from Mar-May were spent and sold.”
To further support the case for a bullish trend, the analysts note the continuing net outflow of BTC from crypto exchanges – it currently stands at 363,000 BTC per month.
The analysts also reiterated the reduction of sell-side pressure from BTC mining operators that were shut down in China, saying the sell-side pressure from these miners is being quenched by the overall profitability being seen by miners who continued to remain operational.
Four Bearish indicators
The Grayscale GBTC market price discount has fallen to -15.3% from last week’s -11.0% and the analysts say BTC demand will slacken and more capital moved away from the BTC spot markets if this trend continues this week.
In addition to this, on-chain activity is currently very low, now settling at a rate of $5.3B/day compared to the highs of $15.5B/day at the peak of 2021.
And although the transaction volume remained low, the majority of it is dominated by coins settling at a loss. Also, around 6.2 million BTC, or equivalent to 33% of the circulating supply, is currently holding an unrealized loss position. This may create additional sell-side pressure in the coming few days to a bearish end.
“Median losses this week were around $353 million per day, more than 2.2x greater than the $158M/day in realized profits. Whilst these volumes are much lower than the two capitulation events ($1.60B and $744M respectively), this demonstrates that investors holding underwater positions continue to spend and sell their coins.”
Finally, to support the bearish trend, the Purpose ETF whose inflow has fallen this week after seeing a strong demand through May and June has a net outflow now at -90.76 BTC since mid-May. This signifies low institutional demand for BTC.