Week #41 has been extremely interesting in the crypto world. On Wednesday, the Bank of England’s governor voiced his opinion that a lack of regulation in crypto markets could lead to a global financial crisis similar to the financial meltdown of 2008. In Moscow, Putin decided that crypto has value and is an acceptable form of currency, signaling that he believes the accumulation of Bitcoin will benefit his nation while threatening the dominance of the American petrodollar.  And back in the States, Coinbase called on Congress to create a new regulator that monitors and manages crypto as an entirely different agency from Gary Gensler’s monolithic Securities and Exchange Commission (SEC). Gensler has been a champion of blockchain technology (teaching a class on it at MIT). We will see if he is a friend or foe of crypto.

On the one hand, crypto bulls are understandably nervous about the risks of over-regulating crypto; on the other, smart money knows that an industry that produces tax dollars becomes a politicians’ best friend. The stakes fly higher than a Himalayan eagle as crypto markets trek into the new rarified air of $2.4T USD. 

How much more old money can crypto disrupt? There is over 60T USD on the cryptographic sidelines as we begin the move into Q4 2021. 

Like Will Shatner soaring boldly into space, we go boldly into the weekend. Investors have been rewarded with a new surge in BTC price above the $59k range and as we wait for Asia to come back online on Sunday.  Something is brewing and it feels like everyone is holding on tight to see what kind of action Week #42 will bring. Will we seek new heights and soar above the previous ATH? Or, will we see a sell-off with a decline back into the 40s? Let’s get started!

Week 41 at a Glance

On-Chain BTC Forecast #40-#41 forecasted a slight downturn in pricing over the weekend with prices gradually bumping higher as we move into the “fall surge.” Aside from the fact that BTC pricing is currently above the 59k USD mark after a relatively flat week correlates strongly with last week’s forecast of lackluster gains at the start of the week with growth potential later on. However, It should be noted that the market has not produced price levels at these heights since May 2021. 

Is the global crypto stage set for the new ATHs that many crypto experts tout? We’ll ask the tough questions in this week’s forecast.

Questions for the Week

As older coins move into profitability, will investors take profits?

As we shift gears into a likely bullish cycle, we can see that a very large percentage (96%) of BTC addresses have finally moved into profitability. High price and profitability tends to create a psychological comfort zone for many, increasing the chances of HODLing for more gains. However, coins that were purchased back in the dips near the tops back in early spring have finally made it through the long summer months and are now becoming profitable. This will drive investors that are finally coming into profit to decide whether to stick it out for the potential rewards, or to get out when they can now.

Furthermore, looking at the total number of BTC that are in profitability, we find over 13M BTC in the money and classified as supply being held by Long-Term Holders (LTH). From this perspective, the market looks strong.  We will soon see if HODLing behaviors persist in the near term, or otherwise if profitable coins will be cashed in. From a macro perspective, miners and HODLers as distinct groups tend to move with smart money and sell into strength. Let’s explore those groups as we consider what will happen next week. Overall, the market does appear to be coming out of a bear market with good consolidation in recent weeks, stepping us up into higher levels and setting up for a potential large move, aka, the “fall surge.”

Will HODLers and Miners continue to accumulate?

Miners are in an accumulation cycle, as confirmed by a 6-month snapshot of Miner Net Position Change.As we zoom out and look at this period last year, we spot a similar setup prior to growth.

Notice how as we moved into November (last year) miner’s positions had relatively little change then, as retail investors began to pile in, selling pressure increased and miners sold into strength as the price peaked in early spring. Currently, as excitement increases and more retail investors swing their attention to BTC, additional accumulation is expected as the market strengthens and we move into the late fall. Experienced miners know that the real boom comes when FOMO retail pours in, which it always does when BTC gets on a run long enough to grab the media’s attention.  

HODLers are clearly accumulating and have been since the summer when prices were low. There was a short selloff in early August as profits were taken. During the first part of every month, miners and HODLers tend to sell coin to cover fiat expenses, but in this case it appears that a bit more volume moved as the market began to recover and we saw a upward trend in price as retail investors begin to move back into BTC.

All data up to this point indicates a strong market with growing interest.

Are retail investors joining the party?

Median Value of Created UTXOs shows us the most typical transaction size that is being created at any given time. When someone buys or sells BTC, a UTXO is created with a value, and the median value shows us the price that most of the transactions have. We use median value as average value would skew to higher transaction sizes and give us a value that isn’t representative of a typical transaction. In other words, there is a downward trend in the median value of new UTXOs that are being created on-chain.  Currently that median value is below $200.00 USD per transaction. During the summer months we saw accumulation by HODLers and there was an uptick in median UTXO that was triple the value it is now. What this means is that retail investors are coming in at lower price points and they are beginning to accumulate as the market heats up.

Going further and exploring the number of active addresses confirms that we are getting more retail players getting involved preparing as news circulates of higher pricing over the next couple of months. 

As expected with more active addresses, we should see more activity, as confirmed by the on-chain data. This means more players are becoming more active as we recover from the last bearish cycle and prepare for a climb into higher price ranges later this year.

Next Week’s Forecast

Week #42 looks strong and prices are set to climb as accumulation behaviors persist. There is some risk with a great deal of profitable coins on the table, however, considering the time of year and the bullish sentiment present on nearly all social media platforms, HODLing is almost certain to continue in the near term as strength builds in the market. The forecast for next week is that the new heights achieved over the last week will consolidate and stabilize, with prices ranging in the high 50s with a strong potential to grow into the low-60s. 

Later this Year

With strong levels of interest and growth of activity in the market, pricing is set to grow. The forecast remains consistent with the past reports with expectations of steady growth into the middle to upper 60s or higher later this year.

This week, week 40, was marked with some modest gains as the price began to rise with excitement throughout crypto markets as investors dive back in for what could be called the “fall surge.” Over the last weekend, prices were fairly stable hovering just below the 50k level, and then rose as the proverbial crypto tide rose to the mid and upper 50s. This is to be expected as HODLing behavior increases, miners accumulate BTC, and professional investors brace for yet another strong finish in Q4 of 2021.

Looking over the last three months of pricing data, an upward trend does appear to be forming as we move out of the summer. Last year at this time, the price of BTC began heating up and began to climb around this time. We’ll be looking for similar action this year as we go into the new year just around the corner.

Major Takeaways for Week 40

• Will BTC continue to surge from recent highs? This week certainly marks an exciting week as the price grows into the mid-fifties. However, looking at the miners’ profitability in the short-term and where the HODLers are; a decrease in price is almost certain for week #41.
• How can we use BTC Liveliness as a short-term pricing metric? Contradicting the above forecast for a drop in price, BTC Liveliness numbers are low, and trending lower. This could be a signal for strong accumulation behaviors as we move into the first phase of the “fall surge.”
• As always, are the HODLers HODLing? The data is clear that there are plenty of BTC that was purchased during the slow periods in price over the last summer. These coins are ripe for picking as time will tell if HODLers will HODL. This forecast senses a small sell-off into the recent market strength. Most HODLers have short memory spans, however, the memory of last fall can’t be forgotten as we saw the start of a +50k growth in price. Will we do it again?

This chart shows us two years of BTC pricing data. We can see that the climb to above 60k started in early October 2020, and added over 50,000 USD to the price as it topped out in the spring of 2021. 

Though it will take time to develop, the slope of growth this year compared to the same time last year is much steeper. This could mean incredible growth potential or the signal that we are still in a local plateau working our way slowly up to the last ATH that we saw in March and April 2021. 

BTC Liveliness is telling us a different story

Either way, it seems that a strong accumulation behavior is emerging now, with BTC Liveliness on a relatively downward trend, the signal we can interpret is that there is more HODLing behavior rather than the circulation of coins in the exchanges. This should signal growth in price. Our sense is that this is just the beginning of a much longer climb that will start in early December.

The Puell Multiple: Catching the Lows

The Puell Multiple, a metric that tracks the mining profitability at any given time–has been a fantastic metric to help us look at the markets from a perspective other than from a buyer/investor. The Puell Multiple, which is an elegant way to look at the number of BTC mined in a day, compared to the preceding year. This essentially tells us how the miners are doing, and when comparing this multiple to price, we can see when it is the best time for miners to release coins into the marketplace; or when they are holding, signaling accumulation, and setting up for a large gain in price.

Looking over the last two years of (average) miner profitability data, we can see that the Puell Multiple is very good at spotting low points in price. Since the last BTC Halving event in May of 2020 (this is when the block reward given to miners was halved. In the first part of 2020, miners received 12.5 BTC for each block mined, since the halving event in May; miners now collect 6.25 BTC for each block mined. It’s notable that the price of BTC was only $8,800 USD giving miners around $110,000 USD per block. Miners today collect 3x the value, which is now more than $340,000 USD per block even though the reward has been halved.  The next mining event could happen as early as mid-2024.

What this tells us in the short term is more difficult to understand, but we can compare this to other times when this metric was in middling ranges above the green band. As it rises up, above 2.0 and higher–the chances that miners will begin to sell-off their mined coin into the rising price of BTC. This forecast expects that we will follow the behavior of last year, signaling a large move in price to the upside as we go into the late months of 2020.

HOLD the line! No… I mean… HODL the line! HODL!!!

Looking at the HODLers, we can find different cycles in behavior and a more short-term perspective on pricing. The Realized HODL Ratio, can tell us when the market is overheated and at the top of a cycle. The last six months are hard to decipher, but, zooming out to two years, we see that currently, we are nearing a high point with this metric.

If we were to forecast price, based only on the RHODL-R here, we should deduce that we are currently at a cycle top, and should expect a reduction in the price for the short term. Looking at the beginning of 2021, and early spring, we can mark cycle tops and immediate price drops following. What this means is that older coins that were accumulated 3-6 months ago are ripe to be sold on the market at a profit. We should expect this to happen again as it’s clear we are near the top of this cycle.

Next Week #41 (Oct 8 – Oct 16)

Over the weekend going into week #41, we should see prices move a bit down in response to the latest uptick in prices as week #40 should certainly be recorded as a bullish week for BTC. Glancing around at other Altcoin markets, the entire cryptocurrency landscape benefited from a surge in demand and an overall gain in value. As such, whenever an expansion in price is realized, we should expect a decrease in action as 3-6 month HODLers begin to take profits early in this “fall surge.”

Later this Year

The outlook for the next few months is extremely bullish. New investors should wait briefly when deciding to buy more Bitcoin as we top out in this latest cycle. However, if the next two quarters are anything like last year, we can only expect the price of BTC to grow over the next 3-6 months as more and more people purchase coins near price tops.

Disclaimer

THE BTC NOW ON-CHAIN BTC FORECAST DOES NOT MAKE ANY EXPRESS OR IMPLIED WARRANTIES, REPRESENTATIONS, OR ENDORSEMENTS WHATSOEVER WITH REGARD TO THE NEWSLETTER. IN PARTICULAR, YOU AGREE THAT THE BTC NOW ON-CHAIN BTC FORECAST ASSUMES NO WARRANTY FOR THE CORRECTNESS, ACCURACY, AND COMPLETENESS OF THE NEWSLETTER.

YOU ARE SOLELY RESPONSIBLE FOR YOUR OWN INVESTMENT DECISIONS. 

WE ARE NEITHER LIABLE NOR RESPONSIBLE FOR ANY INJURY, LOSSES, OR DAMAGES ARISING IN CONNECTION WITH ANY INVESTMENT DECISION TAKEN OR MADE BY YOU BASED ON THE INFORMATION WE PROVIDE. NOTHING CONTAINED IN THE NEWSLETTER SHALL CONSTITUTE ANY TYPE OF INVESTMENT ADVICE OR RECOMMENDATION (I.E., RECOMMENDATIONS AS TO WHETHER OR NOT TO “BUY”, “SELL”, “HOLD”, OR TO ENTER OR NOT TO ENTER INTO ANY OTHER TRANSACTION INVOLVING ANY CRYPTOCURRENCY). ALL INFORMATION PROVIDED BY THE BTC NOW ON-CHAIN BTC FORECAST IS IMPERSONAL AND NOT TAILORED TO YOUR NEEDS.

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As forecasted in The On-Chain BTC Forecast: Week #38, the price of bitcoin was quite stable throughout the week but rumbled up by $4000 USD on Friday, 01 October 2021. Remarkably, the price gain happened in a period of around 30 minutes that morning. Thanks to our high-resolution data from Glassnode, we know exactly when the price jumped that morning–but the exact reasons may be hard to decipher.

Let’s get started.

As data junkies, we have to add stories to the data we are examining, and, we must do it in a way that provides us the most insight into that data. A story is a compass that guides the way we think about any chart, spreadsheet, or infographic that we see. By finding the right story we are in fact, tuning our compass to extract the signals from the data we examine.

How did Twitter influence the price of BTC this week?

The story this week might be as simple as looking at Twitter’s announcement of the new feature of users having the ability to tip users on the platform. The first and most obvious question that comes to mind is this: What is the impact of “tipping” on Twitter in regards to the price this week? Did Twitter’s announcement of using the Lightning Network really drive the price of BTC up? In this case, yes, there is a strong correlation to price and announcement. 

We can clearly connect the increase in capacity of the Lightning Network, BTC’s helpful payment processor enabled on Twitter, to the story about the price of Bitcoin rising thunderously as the effect of the Lightning Network struck on Friday morning. At the very least in the short run.

Zooming out over the last few weeks, and smoothing the data with a 14-day moving average, we can see a relationship with the price of BTC moving with the Lightning Network. The question is: As capacity increases, will the Lightning Network be an even stronger influence on the price of Bitcoin? Taking the macro-view and starting from the beginning of the Lightning Network in 2018, there is definitely a strong relationship between its growth and the price of BTC. We’ll be on the lookout as other platforms adopt similar abilities, and allow users to creatively use BTC in innovative ways.  

What is BTC Liveliness?

Moving along, what are the other factors driving the price of BTC this week? Let’s look at the “Liveliness” of Bitcoin recently.

We like to examine the behaviors of the HODLers and one of the main benefits of the Bitcoin Blockchain is that we can see the exact number of BTC that every wallet has; we can also track how long someone is HODLing or not. This gives us a new metric called “Liveliness”, something that doesn’t exist in the equities markets.

Liveliness is a new metric that gives us the ability to track and measure the “HODLing” behaviors.

Whenever someone moves Bitcoins there is a record of that on the BTC blockchain. The blockchain, like a database, records the “time” the transaction happened (or height), the amount, and the wallets (the sources) of every Bitcoin involved, which also tells us how long the BTC has been held. 

This is one of the amazing innovations of blockchain and BTC, these types of metrics in regards to traditional stocks, and how long a share is held, or who has held those specific shares is not possible in traditional financial markets.

With metrics like Liveliness, we can take a very objective look into how a BTC investor is acting and when–this can be an incredible tool as a qualitative measure.

In the above chart, we can see liveliness dropping, then rising towards the end of the month, and again dropping down. The behavior that it shows is simply when long-term holders are holding or liquidating their holdings. As liveliness decreases, it tells us that HODLers are HODLing, or accumulating BTC. Conversely, as HODLers liquidate holdings, the value increases. 

When we compare this to price movement, we must look at longer periods of time so that we can spot the trends that appear. 

Looking at a month or two isn’t bad, but looking at longer time periods provides us with clearer insight when we are trying to find patterns. Here, looking at the last two years, we can see that towards the end of the year in 2020, HODLers began to accumulate coins, creating less liveliness in the markets mainly because of greater demand driven by fewer BTC coins available in the marketplace. This year seems to be following the same pattern. 

Earlier in the year, HODLer’s sold into the market strength starting in the October and November months and rode the price as it rose to a new All-Time-Highs (ATH). We can deduce that we are currently in an accumulation cycle as HODLers gather or retain BTC, driving the price upward and onward to the next period of selling into the rising market. How long will this period last? If history repeats itself, we can assume that this holding and accumulation behavior will prevail for the next month or two, then later this year we can expect a large sell-off into strength as profits are taken.

Conclusion: BTC’s price will begin to climb as supply decreases and HODLer’s HODL. 

Next week (and this week)

The forecast for BTC in week #40 looks promising. With the surprise gain last Friday, due to the Twitter expansion, it’s expected that we should see a bit of cooling down over the next couple of days as the price of BTC bumps along this latest plateau and gathers momentum for the potential expansion coming mid-late November. 

Later this year

If we use the Liveliness metric detailed in this week’s forecast, the price future of BTC is looking incredibly promising. Basing our forecast on data from last year at the same time, the expectation is that HODLers will accumulate coins in the near term, restricting supply, and creating greater demand in the markets. As the market reacts in the same way it did last year, we will see the price increase to new highs in the upper 60s and 70s, especially if the current price remains relatively flat and we see greater capacity in platforms like the Lightning network. 

Disclaimer

THE BTC NOW ON-CHAIN BTC FORECAST DOES NOT MAKE ANY EXPRESS OR IMPLIED WARRANTIES, REPRESENTATIONS, OR ENDORSEMENTS WHATSOEVER WITH REGARD TO THE NEWSLETTER. IN PARTICULAR, YOU AGREE THAT THE BTC NOW ON-CHAIN BTC FORECAST ASSUMES NO WARRANTY FOR THE CORRECTNESS, ACCURACY, AND COMPLETENESS OF THE NEWSLETTER.

YOU ARE SOLELY RESPONSIBLE FOR YOUR OWN INVESTMENT DECISIONS. WE ARE NEITHER LIABLE NOR RESPONSIBLE FOR ANY INJURY, LOSSES, OR DAMAGES ARISING IN CONNECTION WITH ANY INVESTMENT DECISION TAKEN OR MADE BY YOU BASED ON THE INFORMATION WE PROVIDE. NOTHING CONTAINED IN THE NEWSLETTER SHALL CONSTITUTE ANY TYPE OF INVESTMENT ADVICE OR RECOMMENDATION (I.E., RECOMMENDATIONS AS TO WHETHER OR NOT TO “BUY”, “SELL”, “HOLD”, OR TO ENTER OR NOT TO ENTER INTO ANY OTHER TRANSACTION INVOLVING ANY CRYPTOCURRENCY). ALL INFORMATION PROVIDED BY THE BTC NOW ON-CHAIN BTC FORECAST IS IMPERSONAL AND NOT TAILORED TO YOUR NEEDS.

BY USING THIS PUBLICATION, YOU ACKNOWLEDGE THESE DISCLAIMERS.