Since Bitcoin prices surpassed $42,000 over the weekend, there has been a significant amount of profit-taking. Since then, the asset has dropped 9 percent, and on-chain behavior can be used to gain a better understanding of overall market sentiment.
Glassnode, a provider of analytics, has done just that in its latest on-chain report. The key question is whether this is a “Disbelief Rally,” in which everyone doubts the new bull trend, or simply a Bearish Relief Rally within a larger time-frame downtrend, according to the report.
According to the researchers, accumulation is taking place, and its structure resembles that of the 2018 bear market.
Miners are accumulating, while exchanges are shedding.
Over the last week, there has been an extremely large volume of coins flowing out of exchanges, according to Glassnode. Outflows reached over 100,000 coins per month, a level not seen since November of last year before BTC reclaimed its previous all-time high of $20,000. As a result, the balance of payments has fallen to its lowest level in more than three years, at 13 percent.
Exchange outflows are considered bullish because the coins are being removed from areas where they can be quickly liquidated.
According to the study, the amount of Bitcoin stored on addresses storing between 100 and 10,000 BTC has reached 9.23 million BTC for the first time. In late July, there were a noticeable increase inactive addresses, with active BTC entities increasing by 30% to 325,000.
Over the last week, there has been a surge in realized profit, with more than $2 billion taken, implying that some of the market’s profitable coins have been spent.
In terms of miner activity, the report found that the net transfer volume from miners to exchanges peaked at less than 100 BTC per day in mid to late July. It has increased three times in the last week, demonstrating the resilience of the Bitcoin mining market. Because half of the miners were forced to close recently, the other half can accumulate twice as fast.
Glassnode came to the conclusion that the market returned to macro accumulation almost immediately after the May sell-off, adding, “As such, it appears that HODLing and accumulation is the most likely dominant trend in the on-chain market.”
Bitcoin Price Predictions
BTC was still falling at the time of publication, down 3.5 percent on the day to $38,500. There is minor support just above $37K, but a fall below this level could wipe out all recent gains and return to the $34K zone.
Glassnode mentioned a Bearish Relief Rally, which could be about to occur.