Bitcoin broke through an important support zone and declined to $41,600 where it was trading at 12:30 p.m. All this happened amid cryptocurrency bans in China, which negatively affected market sentiment and triggered a mass migration of coins. Bitcoin migrations are not necessarily related to its sale, as many traders are simply moving their assets to safer and more profitable platforms. This and much more can be learned by conducting an on-chain analysis of bitcoin market activity during the Chinese sanctions and tighter regulation of the digital asset market in South Korea.
First things first. On September 28, the cryptocurrency and bitcoin markets are in a consolidation phase. The powerful collapse in mid-September as well as a drop in the price of major cryptocurrencies became a reason for that. After a period of uncertainty and constant price hikes, the market needs time to stabilize the situation and absorb the appeared volumes. However, this situation happens only if there is a bullish trend and the overall market situation is favorable for growth. Given the turmoil in financial markets due to the Fed meeting, Chinese sanctions, tighter regulation of cryptocurrencies in South Korea, and the 25 mark on the Fear & Greed Index, an onchain analysis is needed to determine current investor behavior.
On-chain activity is the actions of cryptocurrency market players who independently dispose of their crypto-assets, which make the record go directly to the main blockchain. This statistic includes both individuals and large companies.
Price consolidation is a period when a certain cryptocurrency's trend is located within a narrow horizontal price channel. Usually, this process indicates price stabilization or weakness of market participants (bulls and bears).
The Fear & Greed Index is an indicator showing investors' willingness to buy or sell cryptocurrencies (bitcoin and others). If the value is closer to 0, then the market is in a state of fear and prefers to get rid of its coins (sell) to avoid losses. If the value is closer to 100, it indicates a desire to buy and take profits on the growth of cryptocurrency quotations.
Supply distribution by the balance of addresses metrics allows determining the interest of different groups of investors (according to the level of their opportunities). Using this indicator, it is possible to see all groups of bitcoin investors and determine which part of the coin's holders is growing in number. Looking at the first three groups of investors with wallet balances from 10 to 100 BTC, from 100 to 1000 BTC, and from 1000 to 10,000 BTC, you can see the formation of a powerful upward trend over the last thirty days. During the formation, the main stage of volume accumulation began. Addresses with a balance of 1000-10,000 BTC show significant growth, which indicates the increase in the institutional traders, as only a small part of retail traders can buy such an amount of BTC.
When analyzing the other group of big players who own more than 10,000 BTC, you can see the stability and lack of growth. Partially this is due to the tiny number of coins the market offers and they are not indicated on the charts. On the other hand, it gives a clear understanding of who right now makes up the main audience of bitcoin. They are investors with 1,000-10,000 BTC wallets. Right now, more than 80% of the available bitcoin supply is concentrated in the hands of long-term holders, which suggests that this part of the asset's audience has a significant influence on its current price.
By balance of addresses is an on-chain metric that allows seeing the increase/decrease in the number of addresses with certain wallet balances.
The MVRV (Market Value to Realized Value) indicator displays a ratio of an asset's market capitalization to its realized capitalization. This metric provides a more objective view of a coin's current value and market period. The metric also displays the results of coin migration: if the value is below 0, then players transferred coins with losses, and if it is above 0, then investors made profits from coin transactions.
Once the prevailing audience is defined, it is necessary to study the state of the MVRV to understand the possible strategies of investors. If this indicator is above 10, then investors may stage a local sell-off in the hope of preserving at least part of their profits. If the indicator is below 10, then we can assume a wait-and-see situation and set take profit orders when the price of the asset starts to rise. As of 1 p.m., MVRV shows 5%, which may indicate a wait-and-see attitude on the part of market players hoping to take profit. Such MVRV's low value indicates that during the price decline many investors transferred bitcoins with losses.
According to the main onchain metrics needed to analyze the current behavior of investors in the bitcoin market, we can observe a period of accumulation and purchasing of coins in the market. It indicates weak price fluctuations and a lack of momentum for growth. However, the current situation is exacerbated by the negative news background, so most traders have taken a wait-and-see attitude and, if possible, accumulate volumes of coins. For the most profitable entrance in any financial instrument, it is necessary to use the analysis of technical indicators on the horizontal charts of assets.
