The Week Onchain Newsletter

Establishing Equilibrium
Despite choppy price action, the unrealized profit
of Bitcoin investors remains constructive. However,
volumes across all market facets are declining
markedly as an equilibrium between demand and
sell-side forces is established.

UkuriaOC, CryptoVizArt,
Glassnode
Jun 18, 2024 • 6 min read

Executive Summary
Despite chaotic price action, investor
profitability remains robust, with the
average coin holding an unrealized
profit of around 120%.

The demand side has been sufficient to

absorb sell-side pressure and HODLer
divestment but insufficient to promote
further upward growth.

The cash-and-carry trade continues,

with a particular uptick by institutional
traders, reinforcing an expectation of
range-bound trading for the time being.

View all charts in this edition in The

Week On-chain Dashboard.

Market Profitability Remains Robust

Sideways price movement tends to manifest as
investor boredom and apathy, which appears to
be the dominant response across all Bitcoin
markets. BTC prices are consolidating within a
well-established trade range. Investors remain in
a generally favourable position, with over 87% of
the circulating supply held in profit, with a cost
basis below the spot price.

Live Chart

Employing the MVRV metric, we can assess the

magnitude of unrealized profit the average
investor is holding.

Currently, the average coin holds an unrealized

profit of around +120%, typical of previous
markets trading around the previous cycle ATH.
The MVRV Ratio remains above its yearly
baseline, suggesting that the macro uptrend
remains intact.

Live Workbench

We can use the MVRV Ratio to define pricing

bands which assess points of extreme deviations
in investor profitability relative to the long-term
mean. Historically, breakouts above 1 standard
deviation have aligned with longer-term macro
topping formations.

Currently, the BTC price is stabilizing and

consolidating between the 0.5 and 1 standard
deviation range. This again highlights the
statistically high profit the average investor is
holding despite the recent choppy market
conditions.

Live Workbench

When the market decisively punched above the

2021 ATH, significant investor distribution
occurred, driven largely by the Long-Term
Holder cohort. This reflected a substantial profit
being made, which acts to increase the actively
traded and liquid supply.

Typically, in the immediate aftermath of a new

ATH, the market needs ample time to
consolidate and digest the introduced supply
overhang. As an equilibrium is established, this
leads to a decline in both realized profits and
sell-side pressure.

This reduction in sell-side pressure and profit-

taking naturally reduces overhead market
resistance. Nevertheless, the BTC price has been
unable to sustain a palpable upward rally since
the March ATH. This demonstrates that while
the demand side is stable enough to keep the
market range bound, it is ultimately not
increasing sufficiently to reestablish upward
momentum.

Live Workbench

Lackluster Volume
Despite healthy investor profitability, the
magnitude of volume being processed and
transferred on the Bitcoin Network following the
ATH has declined drastically. This underscores a
reduced appetite for speculation and heightened
indecision in the market.

Live Chart

A similar story can be observed when assessing

the Spot Volume traded across major centralized
exchanges. This demonstrates the strong
correlation between onchain network settlement
volumes and trade volumes, echoing a sentiment
of boredom amongst investors.

Live Chart

Exchange Activity Tumbles

Moving one level deeper, we can inspect the
onchain inflows to exchanges in a BTC
denomination, we note once more a considerable
reduction in activity.

At present, Short-Term Holders are sending

around +17.4k BTC/day to exchanges. However,
this is markedly lower than the peak of +55k
BTC/day recorded as the market hit the $73k
ATH in March, where speculation levels were
becoming excessive. Conversely, Long-Term
Holder distribution into exchanges is relatively
low, with only a marginal 1k+ BTC/day in
inflows currently.

Live Workbench

We can visualize the stark decline in LTH

investor activity via the percentage of Long-term
Holder balances sent to exchanges.

LTHs are sending less than 0.006% of their total

holdings into exchanges, suggesting that this
cohort has reached equilibrium and that higher
or lower prices are required to stimulate further
action.

Live Workbench

More coins are currently being transferred in a

position of profit (+11k BTC) than in loss (+8.2k
BTC). This suggests that a profit driven bias
remains overall, albeit by a relatively small
margin.

Live Workbench

Currently, the average coin sent to Exchanges is

realizing a profit of around +$5.5k and a -$735
haircut, respectively, for coins sent in the loss.
This puts the average profit at 7.5x larger than
losses, and only 14.5% of trading days have
recorded a higher value in this ratio.

This infers that HODLers are still divesting, and

demand is sufficient to absorb the sell-side
pressure but not large enough to push market
prices higher. This suggests that the market
structure is more beneficial for range traders and
arbitrage strategies rather than directional and
trend trading strategies.

Live Workbench

Cash and Carry Basis Trades

Another tool that enables us to characterize spot
markets is the Spot Cumulative Volume Delta
(CVD). This metric describes the net bias in
market taker buy vs sell volume, measured in
USD.

At the moment, a net sell-side bias dominates

the spot market, however, the market continues
to trend sideways. This confluences the
aforementioned idea that the demand-side is
approximately equivalent to the sell-side
pressure, keeping the market range bound.

Live Chart

Assessing the futures market, we note a

sustained elevation in open interest, currently
over $30B, and just shy of its previous ATH.
However, as highlighted in WoC-23, a
substantial portion of this open interest is
related to the market-neutral cash-and-carry
basis trade.

In a range-bound market, increases in open

interest can signify an uptick of volatility capture
strategies as traders collect the premium
available in the perpetual swap, futures, and
options markets.

Live Chart

The considerable growth of open interest at the

CME Group exchange highlights a growing
presence of institutional investors. The CME
Group exchange currently hosts over $10B in OI,
representing just under a third of the global
market share.

Live Chart

In contrast to the rising open interest, futures

trade volumes have experienced a similar decline
to spot markets and onchain transfer volumes.
This suggests a relatively light appetite for
speculation, and a higher dominance from set-
and-forget basis trade and arbitrage positions.

Live Chart

Summary and Conclusions

Despite the choppy and sideways market
conditions the average Bitcoin investor has
remained largely profitable. However, investor
decisiveness has declined as signified by
contracting volumes across spot, and derivatives
market, and also in on-chain settlement.

An equilibrium in both the demand and sell-side

appears to be established, resulting in relatively
stable prices, and a notable lack in volatility.
This stagnation in market movement translates
into a degree of boredom, apathy, and indecision
by investors. Historically, this suggests that a
decisive price movement in either direction is
necessary to stimulate the next round of market
activity.

Disclaimer: This report does not provide any

investment advice. All data is provided for
information and educational purposes only. No
investment decision shall be based on the
information provided here and you are solely
responsible for your own investment decisions.

Exchange balances presented are derived from

Glassnode’s comprehensive database of address
labels, which are amassed through both
officially published exchange information and
proprietary clustering algorithms. While we
strive to ensure the utmost accuracy in
representing exchange balances, it is important
to note that these figures might not always
encapsulate the entirety of an exchange’s
reserves, particularly when exchanges refrain
from disclosing their official addresses. We urge
users to exercise caution and discretion when
utilizing these metrics. Glassnode shall not be
held responsible for any discrepancies or
potential inaccuracies. Please read our
Transparency Notice when using exchange data.

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