• Mon. May 20th, 2024

Bitcoin (BTC): Comprehensive On-Chain Analysis to Minimize Holder Losses

Aug 31, 2022

The leading crypto asset globally, Bitcoin, witnessed a challenging path within the last few weeks. Considering the short-term weakness in some of BTC’s notable on-chain metrics, the asset’s price remained downside, with minor additional sell-side on-chain pressure (Glassnode’s new report).

Glassnode revealed that all markets, including forex, bond, equities, and Bitcoin, noted plummets within the previous week. The broad financial market drawdown saw Bitcoin price maintaining extended declines, despite minor sell pressure. The decline in the crypto’s demand and investors looking to quit the market at all costs confirm such narratives.

Bitcoin Requires Help

First and foremost, Glassnode assessed the crypto’s ASOL (Average Spent Output Lifespan). Glassnode Academy revealed that the metric offers insight into token lifespan per transaction output spent daily. A higher value here means more old coins witnessing some action. That can be realized profits, reduced faith to hold the crypto, or leveraging the bull market’s strength.

Meanwhile, a low ASOL means new assets dominate daily network activity, making older transaction outputs dormant and the conviction to keep holding the token. Glassnode discovered that Bitcoin’s ASOL maintained gradual plunges since early last year. Though it surged over the past few weeks as market players spent some older tokens, it was a mere short-lived.

Considering sustained price plunges without high ASOL, Glassnode stated that the ongoing demand would barely survive the daily sell-side pressure, besides extra spending through profit-taking or/and capitulation events.

Also, Glassnode considered Bitcoin’s supply-adjusted token years dethroned index. A CDD (Coin’s Day Destroyed) means the tokens spent times the unspent coins. Meanwhile, the coin-years destroyed index means aggregating the token’s CDD within the past year.

A high figure by the metric amid uptrends could mean the tokens held unspent for a stretched timeframe eventually witness some action. That could trigger an uptick in liquid token supply. Declines in these metrics mean LTHs spending fewer tokens and reduced token interest. That translated to the deterioration of on-chain transactions.

Glassnode revealed continued declines in Bitcoin’s coin-years destroyed, suggesting that bearish markets have a long way to go. Moreover, on weakened fundamentals, Glassnode discovered BTC’s active entities metric swayed near the long-lasting Bear Market Channel’s lower end. Further declines will mean dipping into the aggregate weakness zone, which hasn’t appeared for several years.

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