The Week On-chain Newsletter

The Week On-Chain (Week 22, 2020)

Despite an increasing amount of BTC's supply being in profit, on-chain fundamentals are still in decline.

Liesl Eichholz

• 3 min read
The Week On-Chain (Week 22, 2020)

Bitcoin Market Health

Week 22 saw bitcoin increase from below $8800 to almost $9600, tracing back up to the $10k point once again.

Bitcoin on-chain fundamentals have declined slightly during Week 22. GNI lost another 4 points, taking it down to a value of 56. This was mostly driven by a decline in Network Health, which saw a 10 point decrease as a result of decreased growth.

Read more about how these values are broken down here.

Network Health dropped down to 68 points last week, following a 20% decrease in network growth. While growth picked up towards the end of the week, overall levels for Week 22 were low, and overall network activity also dropped slightly from the previous week's levels.

Liquidity experienced a small decrease last week, driven by a drop in trading liquidity. Its current value of 41 points brings it to a new low for 2020 as BTC continues to flow out of exchanges.

Sentiment grew over the past week, both in terms of overall investor sentiment indicators and saving behaviour. After slowing in accumulation for over a month, hodlers began to increase their positions at greater rates once again, with increased confidence likely stemming from bullish price movements.

Glassnode Compass

The Glassnode Compass outlines the general regime in which Bitcoin is currently located, based on its on-chain fundamentals (as determined by the GNI) and its recent price behavior.

Despite declining on-chain fundamentals, Bitcoin's price increase over the past week has pushed it upwards into the bullish Regime 1 for the first time in 3 months, marking a return to pre-crash levels.

A decrease in GNI means that the compass is in danger of slipping into the transitional Regime 2, so we should be looking for an increase in on-chain fundamentals over the coming weeks to solidify its current position by pushing it further into Regime 1.

Almost 90% of Bitcoin's Supply is in Profit

Bitcoin's Percent Supply in Profit indicates the relative proportion of BTC which are in a state of profit (i.e. the price has increased since they were last moved). Currently, over 89% of BTC are in a state of profit, signalling a potential return to a more bullish market.

Percent Supply in Profit is at its highest point since the bull run of June 2019, having been steeply increasing since its low of 45% after Black Thursday. Historically, levels of 90% and higher have clearly marked pronounced bull markets.

With a very slight further price increase, this metric may soon reach the 90% level. However, whether this leads to sustained bullish price movement or a downward retrace remains to be seen.

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Disclaimer: This report does not provide any investment advice. All data is provided for information purposes only. No investment decision shall be based on the information provided here and you are solely responsible for your own investment decisions.