These Glassnode Insights Are Going To Boost Your Trading Skills Fast
The Birb Nest has partnered up with Glassnode to provide you with on-chain analysis to examine the fundamental factors of cryptocurrencies and to provide new types of analysis to improve trading decisions. On-chain analytics can be utilized to analyse the data on a blockchain to try to understand actions of participants in the market. In this article we will be looking at two metrics that could help create a judgement whether the bottom is in for Bitcoin and to confirm the bull market has started.
The first metric is UTXOs in Profit. This metric is calculated by comparing two points in time: the current price and the price at the time a UTXO (Bitcoin) was created (last moved), i.e. the realised price. A UTXO is in profit (loss) if the current price is higher (lower) than the price at the time the UTXO was created.
When the percentage of UTXOs (14 MA) in profit drops below 50%, but manages to get back above 50% again, bigger bull moves happen. This happened on November 24 2011, June 13 2015 (relatively small increase), August 31 2015, Februari 07 2019 and the most recent one at March 27 2020.
These moves often top out at the 100% of UTXOs in profit, which we haven’t seen after March 27 2020. That means we are still in bull territory.
Bitcoin: Percent UTXOs in Profit (14d Moving Average)
A second metric to look at to judge which stage of the market we are in is called Net Unrealized Profit/Loss. Using this metric we can take into account the actual USD value by which a bitcoin is in gains/losses and calculate the total difference between these gains and losses. In this way we can gauge sentiment, which can be segmented into stages represented by different colors in the charts. The dip on March 14 signalled Capitulation, but quickly turned into Hope and eventually Optimism. Judging by previous bull runs we still have some way to go for the final two stages: Belief and Euphoria.
Bitcoin: Net Unrealized Profit/Loss
Therefore with these two metrics we can conclude that we come from capitulation and the bull market indeed has started. That being said, holding on to your longer term holdings for Bitcoin might be the better play, since these metrics indicate the top isn’t in sight yet.