Bitcoin Price Analysis

Weekly Anchor Analysis of Digital Currencies September 8 (September 17)


The bitcoin market continued its positive trend in recent weeks, and after passing the stabilization stage, it was able to record its highest price in recent months, but after a while, it faced a heavy decline. The price of Bitcoin fell from $ 46,562 to $ 51,838 last week, then fell below $ 43,000 and stabilized at around $ 46-47 thousand.

With the rise in the price of Bitcoin earlier in the week, followed by an increase in market optimism, the volume of intra-chain transactions indicates that the dominance of large and corporate capital in the market is increasing. We are also seeing a decline in sales from long-term investors, which reflects their desire to raise their coins. In addition, with a 42% increase in network hash rate compared to a decrease in hash rate in July, miners have started selling their coins.

Sales pressure from miners

Bitcoin mining, which lost half of its processing power during the large-scale migration of bitcoin miners from China, is now improving. Currently, the average 14-day hash rate of the Bitcoin network is 128 trillion hashes per second, which is 29% lower than the historical peak and 42% higher than the July peak.

This increase in bitcoin network hash rate probably occurred for two reasons; The first reason is the old devices that were obsolete in recent months, but with the bitcoin price rising again and the hash rate declining temporarily, they have returned to profitability and entered the network. The second reason is the successful efforts of Chinese miners to relocate, deploy and restart their devices.

Weekly Anchor Analysis of Digital Currencies September 8 (September 17)
Bitcoin network hash rate

Competition in the bitcoin mining market has always been fierce, and this competition has made the difficulty of the network constantly increasing. Despite the reduction in bitcoin mining rewards due to Howing’s planned event, this hash growth and network complexity has continued. As a result, bitcoin miners’ rewards have been reduced relative to their hash rates in the long run.

Although the miners ‘income is in bitcoin, their capital and operating expenses are mainly paid by Fiat, which makes the miners’ income affected by bitcoin price fluctuations.

Given that in recent months [به‌دلیل قوانین جدید در چین] A large proportion of mining devices have gone offline, and given the global constraints on ASIC device manufacturers, the current bitcoin mining market is responding to the bitcoin price hike of the past year with a delay. Fewer mining machines are currently competing for block rewards, while the price of bitcoin is much higher than last year.

As a result, the miners’ dollar revenue for the hash rate they provided to the network has risen sharply from two years ago, when it was $ 380,000 per exhumation, making mining operations more profitable.

Weekly Anchor Analysis of Digital Currencies September 8 (September 17)
Minor income to hash ratio

Given the above conditions and the rise in the price of Bitcoin up to $ 50,000 in recent weeks, a number of miners have started selling some of their coins to save their profits. This week, about 2,900 bitcoins in the $ 50,000 price range have been spent on miners’ addresses. That’s $ 145 million.

This selling pressure from miners can be due to two reasons; Miners affected by new rules in China who need Fiat liquidity to cover their expenses, as well as other miners who, having experienced falling prices in May, have cashed in on some of their coins to lower their business risk. In addition, some of these revenues may be allocated to the expansion and development of new or second-hand ISIC mining and purchasing facilities.

Weekly Anchor Analysis of Digital Currencies September 8 (September 17)
Bitcoin Miners Inventory

Changes in the miners’ net positions (buy-to-sell ratio among miners) have now returned to neutral levels, reflecting the internal balance between buying for accumulation and selling to finance miners over the past 30 days. The monthly fluctuation of the measure of changes in the net positions of miners is between 5,000 and +5,000 common phenomena (picture below). This makes the current market dynamics seem logical and expected. It is clear that the double selling pressure has been imposed on the market by the miners.

Weekly Anchor Analysis of Digital Currencies September 8 (September 17)
Minor trading position ratio

Increase the size of transactions

One of the key features of the market uptrend in 2020 and 2021 is the significant increase in the entry of organizational capital into the market. This trend is increasingly evident in intra-chain analysis. Even after the 50% drop in prices in May, this trend still seems to be in place.

The average dollar trading volume in the bear market from 2019 to 2020 was $ 6,000 to $ 8,000. The predominant investors of this period were micro-investors and mutual funds.

But in the Gavari market from 2020 to 2021, the dollar average volume of transactions with a very significant growth reached 58.6 thousand dollars during May. This number has undergone a relative correction since July and has now reached $ 30,000 to $ 36,000.

Despite the recent price correction, the average transaction volume for the period 2019 to 2020 has grown by about 370 percent, which shows that the interest of corporate investors in this market remains strong.

Weekly Anchor Analysis of Digital Currencies September 8 (September 17)
The volume of transactions within the Bitcoin chain

Another reason that strengthens the validity of this claim is the increase in the share of trades by more than $ 100,000 compared to smaller trades. In the chart below, you can see that trades with a dollar size of less than $ 100,000 accounted for about 40% of intra-chain trading volume in 2017, while this number has now reached 10 to 20%. These trades are marked in yellow-red on the chart.

In contrast, the number of large, corporate transactions with a transaction volume of more than $ 100,000, shown in green, has increased significantly in the last 12 months. The trading ratio, which has been between 1 and 10 million dollars (light green), has been in the range of 20 to 30% since 2017. But trades with a volume of more than 10 million dollars (dark green) accounted for 30% of the total trades, while in October 2020 (October 1399), it was only 10%. This represents a significant increase in the share of large transactions and corporate transactions in the total market. Note that this data is for unique individuals and entities.

Weekly Anchor Analysis of Digital Currencies September 8 (September 17)
The ratio of transactions based on the size of the transaction

Dominance of young coins over market transactions

Other observations regarding the volume of transactions relate to the classification of transactions based on the age of the coins. The age of coins is the time elapsed since the last intra-chain transaction of a coin. “Spent Volume Age Bands” or “SVAB” is the standard used for this purpose. This criterion classifies the daily transaction volume ratio based on the age of the coins. This criterion is the counterpoint to the “Spent Output Age Bands” (SOAB) criterion, which does not take into account the volume of coins and only measures the number of coins in a certain age range relative to the number of daily transactions.

Some general principles for interpreting these criteria are:

  • When older coins, that is, coins that have not been moved for more than 6 months, are spent, This means that inactive coins may have entered the market. This is more likely to happen in cows when investors want to sell their coins for profit.
  • When the younger coins, that is, coins that have been moved in the last one day to the last 6 months, are spent, It is very likely that “smart money” and long-term investors are holding on and the accumulation phase is happening. in this case, “Hot CoinsThey are leaving the market.
  • Hot coins are bitcoins that are less than a week old. That is, coins that have been moved internally in recent weeks. These coins account for the largest share of daily transactions and are often traded in price fluctuations.

If we look at the situation from a macro perspective, we find that in three cases, a large percentage of the volume of intra-chain transactions is related to young and hot coins:

  1. When the price reaches its peak and the volume of trades, speculations and the movement of hot coins reaches its maximum.
  2. In trader surrender events, new buyers are pushed out of the market en masse and coins are repeatedly traded during high price fluctuations.
  3. In periods of disbelief, when the price has been fluctuating in a range for a long time, as soon as the price is on the verge of an uptrend, low-income traders sell their coins with the slightest profit after a long time.
Weekly Anchor Analysis of Digital Currencies September 8 (September 17)
Lifetime tape spent volume, 30-day moving average

Hot coin transactions now account for 94% of all transactions, a relative high compared to recent months. Meanwhile, the ratio of medium and old coin transactions (more than a month old) of the total transactions is less than 2%, which is even less than this ratio in the bear market 2019-2020.

This shows that the vast majority of coins that are currently spent are coins that are highly liquid and consistently earned. Older coins have been deactivated and taken off the market. In other words, the tendency to hold coins is very high and supply shortages can increase prices in the market.

Weekly Anchor Analysis of Digital Currencies September 8 (September 17)
Lifetime tape spent volume, 14-day moving average

Another thing that confirms this analysis is the volume of supply of old coins, one year after their last transfer. The supply volume of these coins has reached less than 5,000 bitcoins per day. This shows that investors whose coins are more than a year old spend less and are more inclined to hold on to their coins. Experience shows that the supply of coins over a year old decreases when we are at the end of the bear market and at the beginning of the cattle market.

Weekly Anchor Analysis of Digital Currencies September 8 (September 17)
Re-supply of coins that have not been active in the last year

Leverage trading has reached a new high

The latest case to be addressed in this week’s report is the derivatives market. Along with spot trading and intra-chain transactions, we see that futures market openings for Bitcoin and Ethereum have reached a new high.

Currently, the Bitcoin futures market has $ 11.8 billion in open contracts. This number is rapidly approaching its historic peak of $ 15 billion, which was recorded in April.

Weekly Anchor Analysis of Digital Currencies September 8 (September 17)
Bitcoin futures without maturity

The rate of financing in the futures market without Bitcoin maturity is positive and has reached 0.03%. Although this level of positive interest rates is lower than in the first and second quarters of this year, it is almost equal to the interest rate in May, when the price fell immediately after. If people with long trades decide to close their trades, This can lead to a drop in the market in the short term.

Weekly Anchor Analysis of Digital Currencies September 8 (September 17)
Interest rate on futures contracts without Bitcoin maturity

This effect is more evident in the Ethereum market; Ethereum’s futures market reached a new high, reaching $ 8.7 billion.

Weekly Anchor Analysis of Digital Currencies September 8 (September 17)
Ethereum futures without maturity

The financing rate for Ethereum futures, like Bitcoin, has risen to 0.02 percent, the same level as the price drop in May.

At present, the dynamics of supply and demand in instant markets is still in place, But entering the derivatives market requires more awareness and caution, especially if the leverage is high. Positive funding rate and high number of open futures, It can be an important indicator for assessing the risk of long-term liquidation of long trades.

Weekly Anchor Analysis of Digital Currencies September 8 (September 17)
Interest rates on Ethereum futures contracts

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