In less than 24 hours, the price of bitcoin and the entire market cap of crypto went up by more than 9%. Other altcoins are simply following the breakout of bitcoin. We are now back to mid-September levels at $47K-$48K. And it is important to wait for the day close to getting a double confirmation of this falling wedge breakout.
From an on-chain perspective, things look extremely bullish, properly justifying today’s ramp-up in bitcoin price. The market cycle dynamics are looking strong, with the cost basis of long-term holders rising and short-term holders falling. To get a deeper understanding, let us look at some on-chain metrics.
Supply Held by Long-Term Holders
Long-term holders are continuing to accumulate bitcoin and are never missing an opportunity to buy the dip. With the short-term holders having less than 20% supply, it makes the coming squeeze that much more impactful. We do not want to see any major changes to this trend because the long-term holders are holding the floor from a macro perspective.
Q4 Historical Performances
Historically, we have seen some of the best performances of bitcoin price action, and we are now entering Q4,2021. While we had a decent recovery in September, this month is when we likely see a major uptrend in a short period of time. We wanted to see the monthly close above $43K, considering the China FUD and equity market crisis. But we are now much higher than that. So we can see bitcoin hit new all-time this month, which would be in the range of $60k-$70k.
Source- Will Clemente
We recently heard Jack Mallers announce Lightning network- Twitter integration, which is a bullish sign moving forward. Not only that, the on-chain shows incredible growth over the last year. In every aspect, the lighting network is getting better and serving more people. Some of the important ones to monitor are— Network capacity, number of nodes, number of channels, and channel size.
Future Short Liquidations
Bears, who? In less than one hour, there has been a massive futures short liquidation of $47,000,000. As we can see in the chart below, the drop is huge, and it is across all exchanges. With the majority supply going to long-term holders, the number of bears in the market will continue to go down. Then we will see this bitcoin supercycle run like never before.
When the number of entities goes down and are not active anymore, many believe it to be a bearish sign. However, in some cases, it is not because the demand dried up. It could also be a result of migration to the lightning network, and the way exchanges do batch of transactions. We may see this trend continue but I would suggest taking into account other metrics like overall volume and transaction count.
Will Clemente’s Delta Valuation Model
This is a unique valuation model created by Will, a well-known analyst in this space and works for Blockware Intelligence. He created this model by taking the difference between an average cap and realized cap. The on-chain VWAP is used here. He explains that this model accurately caught macro bottoms and tops. When we take the mean of both levels, we get the middle blue line. He highlights this line will be the resistance and an important level of Bitcoin’s price. Do check his newsletter.
Bitcoin has been showing green candles in the fourth quarter for the last six out of ten times. That is 60% probability. Now we cannot predict it is going to happen in the same way as the last bull run. With the market dynamics changing so much, we cannot definitely say it will be the case. But we can follow the money and leverage on-chain for the greater good. The long-term holders have set a concrete floor that is not only hard to break, but also would require a major change in their accumulation behavior. Now that is not changing anytime soon. So with on-chain showing so many bullish signs, we can expect this month to be a lot different, in a good way.
Born and brought up in India, Karthikeya Gutta is a crypto journalist and freelance contributor for ItsBlockchain. He covers various aspects of the industry with in-depth analysis and research. His passion towards blockchain and crypto ecosystem is mainly because he believes it can really change the world and help millions of people.
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