Deny the supply? You'll cry. We'll tell you why | On-Chain Outlook, Edition #45 (13/07/2022)
Join us as we use Supply on Exchange to demystify the market in both the short and long term. Read on for more 👇
(This article has been written by Vũ Nguyen and edited by Andy Phung)
Part 1 | Short Term
Analysis in the short term time frame shows a bottom pivot in Supply on Exchanges (SoE), indicating that SoE has stopped falling.
While an increase of Supply on Exchange across price pivots implies a bear market, a macro outlook of SoE and its trendlines could reveal whether crypto is still a prospective type of asset or not at the current price.
Firstly, let us take a quick look at the short-term perspective.
As discussed in a previous article (https://research.qluster.co/p/sorcery-and-supply-using-exchanges), the relative movement of SoE from a price pivot to the next one implies market sentiment for that duration.
And for digital assets like cryptocurrency, we're only just getting started 👇
BTC vs. Supply on Exchanges (% of total BTC supply)
On-chain data has demonstrated that there has been an increase in SoE since 11th July, indicating an inflow of Bitcoin to exchanges.
ETH vs. Supply on Exchanges (% of total ETH supply)
Ethereum data presents a clear, bearish picture for the 2nd largest cryptocurrency, with SoE appearing not to finish its rally.
Having looked at the Short-Term, we can now move on with the main course! Let us have a look at the Long-Term.
Part 2 | Long-Term
By applying two Exponential Moving Averages, one can see the current direction of SoE.
An exponential Moving Average is a powerful tool for observing the general direction of data and when this direction is changing.
We have presented an introduction to moving average here (https://research.qluster.co/p/building-a-right-trading-perspective)
Now is the time when we will put our knowledge into action.
Applying EMA(50) and EMA(30) to the Supply on Exchange metric shows that this value has been within a downtrend since March 2020.
As we all know, what follows the peak of COVID-19 is a historic moment for the cryptocurrency market.
According to Santiment, this downtrend represents the holder's confidence in the market outlook.
Please note that SOE's pivot was when the Bitcoin price was in the ~3000USD range; therefore, one needs to consider the strength of their confidence relative to the price that gave them "that" confidence.
However, Ethereum shows a different picture.
SoE is contesting the two EMAs, and if it successfully makes a rally, one should expect a staggering environment similar to what happened in 2018.
Furthermore, market participants could be forced to wait until SoE breaks the uptrend and goes down again for ETH to pick up.
Well done! You’ve almost made it to the conclusion. Help us share this research before reading on 👇
Part 3 | Conclusion
To conclude, we can observe that Supply on Exchange shows signs of an increase in the short-term outlook.
If there is nothing new in the market and with minimal external interference, one should expect that Supply on Exchange behaves in correlation with other market indices, such as NASDAQ or Dow Jones.
The long-term outlook for Bitcoin has remained the same since March 2020, as holders gained confidence from the $3000 price range.
However, Supply on Exchange for Ethereum is showing signs of rising, threatening a similar bearish/stagnation environment in 2018.
See you again for the next update.
Did you learn something new in tonight’s research feature? Let us know in the comments to help us deliver more quality crypto and blockchain research 🤗
We’re on a mission to a New World.
It’s a place where people come to share in the wonderful gifts of trading. Where individuals come to qluster their knowledge, united by a shared love for learning.
This is Trading Made Social.
Help us on our mission by sharing the gift of Trading Made Social to new explorers.
Join our Facebook group and connect with likeminded traders 🚀
Like and Follow our Facebook page for activity updates 📣
Connect with us on LinkedIn for future updates 🤝
The information on this website is for general information purposes only. It is not intended as legal, financial and/or investment advice and should not be construed and/or relied on as such. Before making any commitment of a legal and/or financial nature you should seek advice from a qualified and registered legal practitioner and/or financial and/or investment adviser. No material contained within this website should be construed or relied upon as providing recommendations in relation to any legal and/or financial product. Qluster does not recommend and/or endorse products and does not receive remuneration based upon investment and/or other decisions