Bitcoin on its way to $32,000 as on-chain data suggests net accumulation

Cryptocurrency bulls took over the market on Monday, with Bitcoin leading the charge, fighting its way through the $30,000 resistance level it was trading below on Sunday, to now head towards $32,000, a price point not seen in 20 days.

Bitcoin rose over 8%, breaking the $31,000 mark driven by global investors as Asian and European equity markets climbed. American markets were closed for the Memorial Day holiday. The rally in the market can be traced to a weaker dollar, and an on-chain report from Glassnode, which suggested that Bitcoin hodlers are now “the only ones left” and they appear to be “doubling down as prices correct below $30K.”

Marcus Sotiriou, an analyst at digital asset broker, GlobalBlock said in a note on Monday, “Bitcoin broke above $30,000, but it needs to hold the $29,300 level on a retest to suggest continuation to the upside. Relief has been long overdue in the crypto market, as the U.S. stock market already rallied last week, after Jerome Powell’s speech that gave the market clarity on their plans to carry out a soft economic landing.”

What you should know

  • As previously mentioned, the rally in the market comes on the back of a bump in Asian equities, which were bullish on Monday as a result of the fact that major Chinese cities have started to ease coronavirus restrictions after months of strict lockdowns.
  • Traders laid bets that reopening the economy could spark an increase in consumer spending – which could increase company revenues in the coming weeks and could indicate a bottom for stocks in the region.
  • Also, weighing on markets is the Dollar Index (DXY), which measures the strength of the United States dollar. In the last two weeks, the DXY has lost 3.09% from a 20 year high of over 104 basis points to currently trade 101.653 basis points as of the time of this writing.
  • Also weighing in on the market is a Glassnode report that suggests net accumulation in the $30,000 trading zone. The report explained that unlike the sell-offs that occurred in March 2020 and November 2018, which were followed by an upswing in on-chain activity that “initiated the subsequent bull runs,” the most recent sell-off has yet to “inspire an influx of new users into the space.”
  • According to Glassnode analysts, they believe this suggests that the current activity/buying spree we are seeing in the market is predominantly being driven by hodlers (Individuals who have previously bought cryptocurrency and are holding their positions for the long term).
  • While many investors are disinterested in BTC’s sideways price action, contrarian investors view it as an opportunity to accumulate, a point evidenced by the Bitcoin accumulation trend score which “has returned a near-perfect score above 0.9” for the past two weeks, according to Glassnode.
  • Also, according to Glassnode, high scores on this metric during bearish trends “generally trigger after a very significant correction in price as investor psychology shifts from uncertainty to value accumulation.”
  • A closer look at the data provided by Glassnode shows that the recent accumulation has been largely driven by entities with less than 100 BTC and entities with more than 10,000 BTC.
  • In the recent volatility, the aggregate balance of entities holding less than 100 BTC increased by 80,724 BTC, which Glassnode noted was “remarkably similar to the net 80,081 BTC liquidated by the LUNA Foundation Guard.”
  • Entities with holdings in excess of 10,000 BTC added 46,269 Bitcoin to their balance during this same time period, while entities holding 100 BTC to 10,000 BTC “maintained a more neutral rating around 0.5, suggesting relatively little net change to their holdings.”

Long-term Bitcoin holders appear to be the main driving force behind the current price action with some actively accumulating and others realizing losses at an average of -27%. Despite the selling witnessed by some in the long-term holder cohort, the total supply held by these wallets recently returned to its all-time high of 13.048 million BTC.

Glassnode explained, “Unless significant coin redistribution occurs, we can therefore expect this supply metric to commence climbing over the course of the next 3-4 months, suggesting HODLers continue to gradually soak up, and hold onto supply.”

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