Bitcoin Analysts Map Key Bullish and Bearish Cases for BTC Price Action

Bitcoin Analysts Map Key Bullish and Bearish Cases for BTC Price Action

The research detailed Bitcoin’s recent all-time high volatility, and while traders are expecting a possible price breakout, BTC’s October 26 price move to $21,000 is yet to be interpreted as confirmation that 20,000 $ have now become a support.

In a recent “The Week On-chain Newsletter,” Glassnode analysts mapped a bullish case and a bearish case for BTC.

According to the report, the bearish case includes limited on-chain transaction activity, stagnant growth in non-zero addresses, and reduced profits for miners with a high risk of selling Bitcoin, but the data also shows that long-term hodlers are more determined than ever to weather the current bear market.

The bullish case, on the other hand, involves an increase in whale wallets, exits from centralized exchanges and longer-term investors.

Growth of new addresses stalled

On-chain active address growth remains stagnant on the BTC network. A reduction in transactions translates to less usage and growth of network users, factors that could potentially impede the expansion of BTC prices.

Active address bitcoin transactions against the price of bitcoin. Source: Glassnode

New addresses within the Bitcoin ecosystem that have a non-zero address have also plateaued, a trend that also occurred in November 2018. The stalled growth of new non-zero addresses in 2018 was followed by a decline in BTC prices that only recovered in January 2019, when this metric began to rise.

New non-zero bitcoin wallets. Source: Glassnode

Related: The hash rate of public Bitcoin miners is booming, but is it really bearish for the price of BTC?

Sale of miners could trigger a new sale

In previous years, many BTC miners kept large amounts of BTC in their reserves. However, since the start of the bear market, many miners have been selling BTC in order to cover their investment costs and operating expenses.

With the cost of mining BTC rising amid declining revenues, miners are deleveraging by selling their newly mined BTC. Glassnode warned:

“Miner deleveraging events may lead to distribution in tight order books, historically weak demand and continued macroeconomic uncertainty and liquidity constraints.”

As the price of BTC declines and miner profitability declines, miners may be forced to liquidate more of their Bitcoin reserve holdings.

Bitcoin balance in miner wallets. Source: Glassnode

The whales pile up

Despite the decline in BTC prices, many BTC whales who hold a surplus of 10,000 BTC may be increasing their holdings even in bear market conditions. As the chart below shows, they continue to accumulate BTC after being distributed in April and September.

Bitcoin accumulation trend chart. Source: Glassnode

BTC Withdrawals From Centralized Exchange Could Reduce Selling Pressure

Funds transferred from centralized exchanges weaken the immediate selling pressure in the market. Coinbase, one of the largest centralized exchanges, is seeing large amounts of BTC withdrawals. When comparing the current BTC outflow from Coinbase to the post-March 2020 peak on the exchange, over 48% of the total BTC on the exchange has moved.

Glassnode points out:

“Coinbase experienced a very large scale net drawdown of -41.6k BTC this week. […] Importantly, these outflows are based on our best esteemed wallet clusters and appear to be a combination of coins circulating in both investor wallets and/or institutional grade custodial solutions.

Bitcoin balance on Coinbase. Source: Glassnode

Hodlers keep on hodling

According to the Realized Cap HODL Waves metric, the total USD wealth held in BTC, valued at the time of each coin’s last transaction, is now disproportionate towards longer-term holders. The proportion of wealth held in coins that has changed over the past three months is now at an all-time low. The reciprocal observation is that the wealth held by coins older than three months (increasingly held by hodlers) is now at an all-time high.

Bitcoin HODL waves. Source: Glassnode

Some Bitcoin analysts believe that BTC’s low volatility during this period is “a calm before the storm” and the current macroeconomic and price surge in BTC may show hodlers’ determination as the winning factor.