On-Chain BTC Analysis: Investors Buy Decline As Supply Shock Intensifies

Long-term Bitcoin investor positions remained strong despite the sharp drop on September 7. Furthermore, we continue to see a deepening of the impact of the offering as the amount of BTC on exchanges steadily declines.

organic growth of the Bitcoin network is illustrated by the number of addresses that have different BTC values, most of which increased during the recent decline. On-chain data confirms that the recent strong price movement was primarily triggered by over-leveraged derivatives traders.

BTC price action

Last week, Bitcoin reached a local high of $ 52,956 just above the Fibonacci retracement level of 0.618 on September 7. On the same day, there was a sudden drop that took the price of BTC to a low of $ 42,900. One reason for the 19% drop was offsetting leveraged long positions, which were liquidated for a total of $ 4 billion.

Tradingview BTC chart

Shortly after the sharp drop, the price rallied and is currently trying to rally around $ 46,000. Despite the short-term rebound, technical indicators in higher ranges are starting to give bearish readings.

However, it is worth noting that the decline served to validate the long-term area at 0.382 Fib retracement as support. This area coincides with the horizontal support levels and the all-time high for Bitcoin on January 8, 2021.

Investors buy during the crisis

Analytical data from the chain can help explain how investors performed during the sharp decline. It turns out that many investors who had real BTC did not show any significant movement during the sudden crisis.

This was pointed out by the chain analyst. @woonomic, who tweeted that “the leverage markets have sold out, but investor buying has strengthened.” Furthermore, he compared the recent drop to the incident caused by the COVID-19 crisis in March 2020. Woo said:

Also Read Coinbase Forensic Software Purchased from US Customs and Immigration.

“Sudden BTC drops are caused by deleveraging, the COVID drop was similar in that derivatives overreacted, but it was backed by investors at the time. This was completely divergent and a mystery.

This is supported by the accompanying chain analyst chart, which shows an intensified supply shock at multiple levels: stock market exits and short- and long-term investor positions. Woo concludes that the effect of the crash is simply “cheap coins.”


Bitcoin continues to drain from exchanges

Willy Woo’s observations are confirmed by another network analyst. @TXMCtrades, which indicates the 14-day illiquid supply market gradient indicator. It is used to estimate when long-term investors with strong hands hold their positions more firmly than price action indicates.

According to the analyst, “long-term investors have not been affected by the decline and have actually increased their holdings.” This is confirmed by the divergence between the increase in investor positions and the decrease in the price of BTC and the two orange bars at the bottom of the chart below.

An additional argument was provided yesterday by @WClementeIII, which also highlighted the intensification of the Bitcoin supply shock. on-chain analyst encourages people to ‘ignore the noise’ and focus on the macro upward trend brought on by the decline in the number of available BTC coins.


long-term outlook highlighted by the three analysts mentioned above is very evident in the graph of Bitcoin’s balance on cryptocurrency exchanges. It turns out that the amount of BTC on exchanges has been steadily declining since the COVID-19 crisis (red circle).

Read also Another province of China bans cryptocurrency mining Balance of BTC on Glassnode exchanges

only two significant increases in currencies on the exchange during this period were seen during the increases in the price of BTC in July 2020 and especially during the recent drops in May 2021. Also, the amount of BTC available on the exchange is ending reaching a 3- year low. last time exchanges posted such a low bid was in late August 2018 (green circle), with Bitcoin trading at around $ 7,000.

Small positions grow

last noteworthy indicator before the recent drop is the number of addresses that contain different amounts of BTC. In the first group, there are 3 types of addresses with small amounts in the range of 0.01-1 BTC.

Here we see a clear continuation of the bullish move (green rectangles) despite the Bitcoin price drop a few days ago (red rectangle). number of small positions has increased since at least mid-May-July 2021 consolidation (orange arrow). recent sudden crisis only reinforced this trend.

Glassnode BTC direction chart

We see a more diversified behavior in the second group of addresses, which collects positions with amounts between 10 and 10,000 BTC (gray rectangle). Increases were seen in addresses with more than 10 BTC and more than 10,000 BTC. Drops are seen in addresses with more than 100 BTC and more than 1,000 BTC. Also, since the May-July 2021 consolidation, the trend in the number of large directions remains horizontal (orange arrow).

Glassnode BTC direction chart

Finally, it is worth noting that regardless of the amount of BTC held, the general trend in the number of addresses is not downward. This indicates the strong organic growth of the Bitcoin network and, through the continued increase in the number of small addresses, the increasing distribution of coins.

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For the latest Bitcoin (BTC) analysis from BeInCrypto, click here.


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