Bitcoin, Ethereum: On-chain outlook, Edition #7 (10/07/21)

On-chain continues to paint a bullish narrative as the market trends sideways. Are we seeing an accumulation phase before a breakout?

The recent choppy price action, with no clear direction, has proved frustrating for both traders and investors. It seems every day, everyone from influencers on Crypto Twitter to paid discord groups seem to flip their bias, e.g. bullish at resistance, bearish at support.

These markets are not easy, with patience and knowing when to not overtrade being the winning horse. While the technical outlook for Bitcoin may be leaning towards a bearish sentiment, the story from a supply-demand perspective continues to be quite different. 


Let’s dive into Bitcoin and Ethereum in this edition.

Bitcoin supply

  • To no surprise, Bitcoin supply on exchanges continues to trend lower. Interestingly, supply on exchanges is now at 13%, the lowest it has been since January this year (see purple circle).

  • As expected due to its inverse nature, Bitcoin supply outside of exchanges has sustained that uptrend we mentioned in our previous edition (see red circle).

Ethereum supply

  • The story is even better for Ethereum compared to Bitcoin. Supply on exchanges is at an all-time low dropping to 17% (see red circle). 

  • Supply held by top-non exchange addresses, ie. whales or large players, continues to uptrend (see blue circle). This is partly due to more Ethereum locked away long term and staked on Ethereum 2.0

Our on-chain editions have painted a bullish picture for months now yet the price continues to trend lower. As a reader, you may be wondering ‘What’s the point of on-chain analysis if it can’t help predict these current movements?’. As mentioned previously, on-chain is only one piece of the puzzle, albeit a useful one. Accumulation can take months and can be across various price points. Whales can often re-accumulate an asset early, only to find the price drop more before buying more, hence resulting in an ‘averaged’ entry. 

Use this time to think long term and prepare for all scenarios. Averaging into positions and capital preservation is vital in this current market. Think of your capital as ammo in a loaded gun. You wouldn’t use all your bullets in quick succession, now would you?

See you again for the next update.

- q

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