Home » On-chain analysis of Bitcoin (BTC ) – Short-term speculative risk?

On-chain analysis of Bitcoin (BTC ) – Short-term speculative risk?

by Patricia

Temporarily clearing $50,000 resistance, Bitcoin (BTC) is back to hovering within the range established since the beginning of 2022. Contrasting this lacklustre price action, a broad spectrum of investors ranging from retail to institutional seemed to be accumulating BTC with exemplary fervour. But that was without taking into account the influence of derivatives markets on the short-term price of the queen of crypto-currencies. On-chain analysis of the situation.

Bitcoin retraces once again

The price of Bitcoin (BTC) stumbles below $50,000 and the MA200. Failing to break through these two resistance levels, Bitcoin reenters its range, identified in previous analysis.

Despite BTC once again hovering around $40,000, on-chain data still indicates that there is strong demand in the market. Interest in Bitcoin does not seem to be waning, although the price is correcting.

Figure 1: Daily Bitcoin (BTC) price

Figure 1: Daily Bitcoin (BTC) price


This week we look at the downward dynamics of exchange reserves and the demand driven by three major BTC buyers before completing our tracking of risk exposure in the derivatives markets.

A diligent, broad-based accumulation

Let’s begin this analysis by introducing a new metric: the Accumulation Trend Score.

This tool was designed by Glassnode to measure the overall accumulation of investors’ portfolios. It tracks when large entities (whales) and/or large portions of the market (shrimp, in large numbers) are accumulating or liquidating BTC, all while filtering out miners and exchanges.

Figure 2: BTC Accumulation Trend Score

Figure 2: BTC Accumulation Trend Score


The metric oscillates between the values 0 and 1 with the following interpretation:

  • Values close to 0 (yellow/orange) indicate that the market is in distribution or that there is little significant (bearish) accumulation.
  • Values near 1 (purple) indicate that the market is in net accumulation and that the balance of investors’ portfolios is increasing significantly (bullish).

This week, a steady stream of values above 0.65 was recorded, indicating that a general accumulation trend is underway.

This information can be easily confirmed by looking at the total balance of exchanges, which is starting to fall again, indicating massive withdrawals.

After a stagnation of reserves between 2.5 million and 2.6 million BTC since the last quarter of 2021, the total amount of BTC available at the centralized exchange platforms now represents only 13% of the outstanding supply.

Figure 3: Total reserves of exchanges

Figure 3: Total reserves of exchanges


It is worth noting that since the March 2020 capitulation, this balance has begun a structural downward trend, a sign of a paradigm shift by market participants who now tend to accumulate BTC on a massive scale, notably via DCA strategies.

This is clearly shown in the chart below. Representing the monthly variation of total exchange reserves, it depicts the periods of deposits (green) and withdrawals (red) over a given period.

Figure 4: Net Position Change of Exchanges

Figure 4: Net Position Change of Exchanges


We can clearly see the amplitudes of the deposit waves decreasing after March 2020, while withdrawals, which used to rarely exceed 50,000 BTC, have now become a new norm.

The current market structure is therefore part of a dynamic of accumulation and withdrawal of BTC from exchanges to cold-storage portfolios.

Indeed, the number of so-called “illiquid” BTC (held outside exchanges and smart contracts) has been growing steadily since July 2021 and currently represents more than 75% of the outstanding supply.

Figure 5: Iliquid supply

Figure 5: Iliquid supply


This last chart is impressive in its clarity of interpretation: BTC is leaving the exchanges and is being massively hoarded by various entities, drastically decreasing the liquidity of BTC and creating long-term upward pressure on the bitcoin price.

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