Bitcoin’s off-chain data suggests further upward momentum for its price

After months of incessant turbulence, the cryptocurrency industry has seen something of a breakout in the past two weeks, with total market cap recently hitting $ 2 trillion for the first time since mid-May.

In fact, in the past 21 days alone, the exorbitant $ 700 billion has invaded the digital asset market, leading many to believe that more money can enter the sector in the short term.

Two recent events seem to have created this bullish sentiment: Ethereum’s successful London hard fork, which made the network appear more scalable, and the recent Senate Infrastructure Act and its tax implications for companies in the United States. Cryptocurrencies in the USA

Bitcoin’s off-chain data suggests further upward momentum for its price
Bitcoin’s off-chain data suggests further upward momentum for its price

Kadan Stadelmann, CTO at blockchain solutions provider Komodo, told Cointelegraph:

“Regardless of the legislative outcome, this discussion puts cryptocurrencies in the foreground of American politics and sensitizes the public to blockchain technology. Another finding is that traditional financial institutions are likely to increase crypto accumulation if the clarifications are formally adopted.

A closer look at some off-chain data

Stadelmann said Bitcoin (BTC) accumulation is currently occurring among both whales and miners, with the withdrawal from the exchanges leading to a supply shortage, suggesting that the price could continue to rise in the short term. With that in mind, he believes the major cryptocurrency will find it difficult to regain its all-time high of $ 65,000, although BTC could soar to $ 50,000 or possibly a little more.

The main factor behind the recent upward momentum for Ether (ETH) was clearly the recent London update. Indeed, after published data There have been multiple spikes in withdrawals from major altcoin exchanges, according to cryptocurrency analyst Glassnode, which, for Marie Tatibouet (Marketing Director of Gate.io cryptocurrency exchange), suggests that number after number of people ETH have continued to amass exchanges.

Additionally, he highlighted that the total value locked in decentralized finance contracts, or DeFi, also exceeded $ 80 billion for the first time since the first quarter of 2021. In addition, the number of ETH tokens deployed on the Beacon Chain has exceeded $ 6.5 million. “Overall, these are very positive signals that tell us that the market is convinced of Ethereum,” said Tatibouet.

HODLing mood is strong

Bitcoin accumulation has continued behind the scenes, as Cointelegraph previously reported, and the total supply of Bitcoin in the hands of long-term owners recently hit an all-time high of 82.68%. On the contrary, the supply in the hands of the short-term owners has continued to decline and is around 20%. This seems to suggest that more and more BTC holders are trying to keep their holdings.

Glassnode’s analytics team highlighted that every time the proportion of coins held by short-term owners reaches 20% or less, there is a significant reduction in supply, d of the underlying asset.

In addition, earlier this week the dominance of Bitcoin transactions over a million dollars more than doubled (from 30% to 70% of the total transferred value) for the first time since September 2020. Investors are not inclined to facilitate large-volume transactions, the Glassnode team believes that institutional investors may be behind the surge in the number of transactions from $ 1 million to $ 10 million.

BTC whales refuse to sell

According to the cryptocurrency analysis company mood, Bitcoin millionaires around the world, i.e. wallet addresses who have between 100 and 10,000 bitcoins, have not yet sold their coins in order to make a quick profit. The total number of BTC held by these addresses is now 9.23 million, marking the all-time high of July 28th.

Additionally, the net flow of Bitcoin on digital asset trading platforms to addresses likely to be intended for storage has been impressive lately. They’re moving, according to updates from analytics platforms like Whale Alert Tens of thousands of BTC every dayshowing healthy transaction activity in the cryptocurrency ecosystem.

Yuriy Mazur, head of data analysis at CEX.IO Broker, a platform for trading cryptocurrencies via contracts for difference, told Cointelegraph that this data suggests that most holders are optimistic about short-term market growth and do not plan to change their positions regardless to dispose of the negative news that has rocked the market lately. He added:

“With a forecast that the price of Bitcoin will rise from around $ 45,000 to over $ 70,000 by the end of the year, many investors are looking forward to being part of this historic price surge.”

Institutional interest remains high

According to the on-chain analytics service CryptoQuant, bitcoin reserves on derivatives exchanges around the world have continued to decline to levels not seen since May, when the most recent market crash hadn’t yet occurred. With that in mind, the company confirmed that futures exchanges’ reserves stood at 1,256 million bitcoins on August 10, the lowest level since May 11.

However, it appears that funds are flowing back into Grayscale’s Bitcoin Trust as recent data suggests that a growing list of traditional gamblers has continued to top up their cryptocurrency coffers in recent months. Not only that, there is enough information to suggest that even during the most intense period of this year’s BTC bull run, derivatives balances rose in reverse: declining reserves only marked the start of the run at $ 64,500.

It seems that most institutional players have not been intimidated in the least by the wave of negative news surrounding the cryptocurrency market, such as the miners’ route in China or the current political drama surrounding the US infrastructure law. This is evidenced by the fact that exchanges’ total bitcoin holdings were around 2.44 million bitcoins earlier this week, a three-month low.

There were no big panic sales

It’s no secret that the 2018 market crash was in large part due to the Initial Coin Offerings (ICO) craze, where hundreds of startups amassed billions of dollars in capital to flee quickly. When the bubble burst, the overall market valuation of the entire crypto industry fell from $ 700 billion to $ 102 billion in less than 11 months, a loss of more than 85%.

On the flip side, the price rally in 2021 appears to be driven by strong macroeconomic factors, largely driven by investors looking for monetary safe havens thanks to monetary policies from central banks around the world. For comparison: In the past year and a half, global debt figures have continued to rise and are currently over 281 trillion US dollars (around 355% of global gross domestic product).

After all, according to the Institute of International Finance, this debt will only increase in the short term (by at least another 10 trillion US dollars by the end of 2021), especially as the variants of COVID-19 continue to have devastating effects worldwide. .

With all of this data, it seems that the current positive momentum surrounding the crypto market is largely being driven by strong fundamentals as well as strong innovation.

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