At the end of last week, a phase of BTC sales began, which is still continuing.
Among the coins spent, those aged 6 months to 5 years predominate.
Glassnode’s most recent report, on bitcoin market activity in the week from Monday, August 16 to Sunday, August 22, highlights growth in both futures volume, as well as open interest, or contracts still pending settlement.
At the same time, medium and long-term holders began to take profits during that week, which closed when the price action surpassed the psychological mark of USD 50,000.
Regarding the bitcoin derivatives market
, open interest in options and futures increased last week to reach new local highs, the report notes.
The authors note that after the mid-April drop in open interest from USD 27.4 billion to USD 10.6 billion or 61%, a recovery of 56% has been recorded. Last Sunday 22nd, the report
recorded an open interest of USD 16.6 billion, as highlighted in the chart below. Open interest has recovered 56% from its local low at the end of July. Source: Glassnode.
In terms of directional bias for traders, the report argues that perpetual futures funding rates have a moderate tilt towards long positions, as seen in the chart below. “Funding rates have remained positive since late July as bitcoin futures markets trade above spot prices,” the study says.
This means that much of the market believes that the price of BTC will go higher in the short to medium term.
Although with recent positive values, funding rates are lower than year-earlier levels. Source: Glassnode.
While positive at present, funding rates are nowhere near the peaks seen in the first and second quarter uptrend, the authors note. “This may indicate that excessive leverage is not yet in play, and perhaps the uptrend will remain reasonably spot-market driven and healthy,” the study notes. The spot market is the buying and selling of bitcoin at the market price,
without taking on debt (leverage) to acquire the asset.
Options markets also saw multi-month highs in open interest, as seen in the next chart. Options open interest increased by more than $4.1 billion (+105%) from the lows set in June.
Bitcoin options open interest. Source: Glassnode. ”
The current level of USD 8 billion in open contracts, is similar to the levels seen during the May settlement and in January-February 2021,” the study argues. It should be noted that, in those previous cases, prices were at a lower level, trading around USD 30,000 to USD 40,000, the report says.
Moreover, relative to the total size of the market, the degree of open interest in derivatives markets is relatively low compared to the degree of leverage
observed in the first half of the year, the study asserts.
Bitcoin selling increases
At the close of the week, profit-taking did not appear particularly significant, but signs began to manifest on-chain
that some investors, especially those with older coins, began to sell their BTC.
The moderate rise in selling is seen in the chart below which highlights a sharp decline in BTC inventories on exchanges at the end of July, to remain fairly stable in August, and increases at the end of last week.
BTC balance on exchanges. Source: Glassnode.
The net flow metric shows, in the chart below, last week’s moderate inflows, corresponding to profit taking by traders and investors.
Net BTC flow to and from exchanges. Source: Glassnode.
The magnitude of inflows, the report notes, is similar to that recorded in the bull phase of the period between December 2020 and April 2021. This is “reasonably expected” behavior, the authors stress.
Identifying the Age of Spent BTC
If the Age Bands of Spent Outflows metric is employed, it is possible to identify the cohorts of holders who are spending their coins, the report states. During the past week, there was a spike in the oldest coins.
especially those older than six months, according to the study.
In the past year, those older coins have reappeared in two specific instances, the report says.
Either it is
sales in a bull market, or distribution in a context of intensive sales, as happened last May.
Spending of older coins has increased. Source: Glassnode.
The chart above shows how spending of older holders, in the lower bands, has increased with increasing slope.
“We can take a similar view to the above by looking at the 6-month to 5-year spent outflows, which largely captures experienced bitcoin investors and traders who have already weathered the non-trivial volatility in this cycle,” says Glassnode, referring to the chart below.
6-month to 5-year old spent outflows. Source: Glassnode.
A strong rally is seen in all age bands over the past week, further suggesting that some currencies are taking liquidity out, the report says. It also highlights two periods in May and June this year (shaded in pink), where spending peaks for coins of different ages corresponded to price corrections.
On-chain activity continues to diverge
Until last week, on-chain activity was subdued and unresponsive to positive price action, the study contends. Transactions remained at historically low levels, between 175,000 and 200,000 transactions per day, the report notes.
Number of daily bitcoin transactions. Source: Glassnode.
Those levels had only been seen in a few instances in the last 5 years. The 2016-2017 bull market is one such instance, in the phase when bitcoin’s rally
was taken with disbelief, and in the sharp corrections that occurred in the middle of the bull cycle, according to the report.
Another instance of low activity on the chain occurred when interest in bitcoin seemed to fizzle out, in the bear market of 2018-2019, and an 85% correction was recorded. The third scenario of low activity is the current one, the report says, which occurred after a 50% correction and 2.5 months of consolidation.
Bitcoin transaction volumes also down
Transaction volumes are similarly depressed, the study notes. This means that, just as there are fewer transactions, so too are the amounts transferred s
on minors. The authors add that the Bitcoin network recorded a daily volume of USD 18.8 billion last week. “This is 37% lower than at the 2017 bubble peak, and 57.6% below the peak set during the May capitulation event,” Glassnode highlights. Capitulation refers to the massive selling of an asset when its price drops sharply, and that asset is not expected to rebound. These are sales at a loss, to salvage some of its value, before the price deteriorates further.
The recent drop in BTC volume transferred is 57%. Source: Glassnode.
However, settlement volume is still 276% higher than the USD 5 billion level, which was typical throughout 2020, the report says. It clarifies, however, that one has to take into account the fact that the price has risen by about USD 10,000 to the current level which is close to USD 50,000 (+500%).
Despite the divergence between low transactional activity and volume transferred, the supply dynamics remain bullish, the study claims. At the end of last week, long-term hodlers reached an all-time high of 12.69 million cumulative BTC, which surpasses the previous high of 12.65 million, recorded in October 2020.
In the first half bull market, long-term holders distributed 1.75 million BTC, which created an oversupply and led to the all-time price high in mid-April, the report notes.
After that, investors drastically slowed their spending, and the coins that accumulated in late 2020 and early 2021 were steadily maturing towards the 155-day threshold, so that their holders could be classified as ‘Long-Term Holders’.
The recovery of long-term holders’ supply to an all-time high level has taken only 100 days, which shows how significant the accumulation was in the initial phase of this bull market, the report argues. It also notes that the fact that this trend has not yet abated demonstrates that significantly more coin volume is maturing.
“This adds further weight to the argument that the previous spending observed last week is likely to be low coin volume and strategic risk reduction, rather than a loss of conviction and a massive outflow,” the report concludes.
The current week started with the break of the USD 50,000 barrier, after which a correction took place, which would have been influenced by increased incoming BTC flows on the exchanges. Both facts were reported by this media