The Week On-chain Newsletter

The Week On-Chain (Week 51, 2020)

BTC smashed through its previous all-time high to find support above $23k for the first time ever. Meanwhile, on-chain fundamentals remain strongly bullish for BTC and other cryptocurrencies.

Liesl Eichholz

• 5 min read
The Week On-Chain (Week 51, 2020)

Bitcoin Market Health

Bitcoin had a stellar week of growth, smashing through its previous all-time high to find support above $23k for the first time ever. After starting the week at $19,150, BTC rose rapidly over Wednesday and Thursday and continued to make gains throughout the rest of the week. All in all, it saw a 23% price increase, ending the week at $23,510.

For the Bulls

Bitcoin's Reserve Risk remains extremely low despite the price passing its previous all-time high, indicating a favorable risk/reward ratio for investing.

Reserve Risk is used to assess the confidence of long-term holders relative to the price of BTC; when confidence is high and price is low, Reserve Risk remains low, and there is an attractive risk/reward to invest (learn more).

Bitcoin's Reserve Risk currently remains close to the green zone despite significant upward price movements, suggesting that there is high confidence in BTC at this price point.

When Reserve Risk was at similarly low levels during the 2017 bull run, the price of bitcoin was still under $2000, and saw a 923% increase before the top. If BTC were to follow this same trend in the current market, it would translate to a market top of almost $220,000.

For the Bears

As we forecast in last week's newsletter, BTC's recent downward correction in Entity-Adjusted SOPR was indeed a signal of an approaching upwards trend. The downward trend has now reversed, suggesting that BTC's sideways movement below $20k may be well and truly behind us, with new support levels staying above $23k for the time being.

However, in bull markets, similar spikes in SOPR are usually followed by sideways or more gradual upwards price movement before the next acceleration.

As such, although on-chain indicators are still macro-bullish, this trend indicates that we may see some sideways movement for BTC before the next price spike. While this news is not bearish per se, it does suggest that there are some limitations on BTC's growth in the very short term, despite the overall environment remaining bullish.

A Bullish Comment from Willy Woo

Woo's Take: We are in a solid bullish environment over the next few months.

The Bitcoin Difficulty Ribbon, is a reliable medium term indicator tracking the contraction and expansion of mining hash power on the network. Expansions out of a compressed zone are bullish.

The recent approach towards all-time-highs coincided with a contraction in the ribbon; now, it’s once again in an expansion. We are in a solid bullish environment over the medium term environment (next 3 months).

Read more from Willy Woo in his newsletter, The Bitcoin Forecast.

Altcoin Feature: Litecoin Outperforms Top 10 Cryptocurrencies

Over the past week, Litecoin has experienced a meteoric rise, gaining almost 40% over 7 days and significantly outperforming the rest of the top 10 cryptocurrencies. While it is still far from its ATH of $375, its gains over the past week suggest that it is regaining popularity after falling out of the top 10 earlier this year.

Meanwhile, litecoin's MVRV Ratio remains low, at just 1.6 compared with bitcoin's 2.9. This ratio of market cap to realized cap indicates that LTC is relatively undervalued in comparison with BTC, suggesting room for further growth before it becomes overvalued.

Litecoin's MVRV Ratio is also well below its 2017 high of 3.7, further suggesting that this often underestimated cryptocurrency is well poised to make a comeback.

Which altcoins would you like to see us cover in future editions of The Week On-Chain? Let us know on Twitter.

Weekly Feature: ETH2.0 Staking Contract Exceeds $1 billion in ETH Staked

The value of ETH staked in the new ETH2.0 staking contract has exceeded $1 billion USD for the first time.

After meeting its minimum staking goal on 24 November, the contract has seen continued deposits from participants hoping to stake in ETH2.0, now sitting at almost 1.7 million ETH; over 320% of its initial goal.

The past few days have seen a marked increase in the rate at which ETH is staked in the contract. So far, 1.5% of the total ETH supply has been staked, a number which is only expected to increase as more ETH holders seek high yields from ETH2.0 staking.

With over 125,000 addresses still holding at least 32 ETH (the minimum required amount for a single node), at least 4 million ETH (over $2.5 billion USD) is still immediately available to be staked.

With such lucrative opportunities for yield with minimal risk, the number of staked ETH can be expected to continually increase, restricting circulating ETH supply and contributing to scarcity. This, in combination with the growing number of ETH locked in DeFi protocols, suggests positive price implications for ETH as its supply is further restricted.

Product Updates

Metrics and Assets

  • Realized HODL Ratio (BTC) - A market indicator that uses a ratio of Realized Cap HODL Waves to indicate when the market may be overvalued.
  • Median Transaction Fees (BTC, ETH, LTC) - The median fee per transaction, excluding minted/mined coins.
  • Total Number of UTXOs (BTC, LTC) - The total number of UTXOs in the network.

Features

  • TradingView Integration (beta) - As requested by our users, we have integrated TradingView into the Glassnode Studio interface! With this new feature, you can now view and compare Glassnode metrics in TradingView's charting environment.

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.