Home Cryptocurrency This metric that called the 2017 top is now flashing red

This metric that called the 2017 top is now flashing red

by Serge Shlykov

After weeks of selling bitcoins (BTC), high profile individuals or whales are finally buying back in.

Not only did their buying activity increase when the BTC price broke the two-month uptrend triangle to new all-time highs, but it has remained unchanged since the price fell on the 18th. April has fallen.

Whales returned to collect bitcoins.

Their continued buying activity comes at a time when addresses with more than 1,000 bitcoins are reaching their 4-month support line.

Bitcoin: Number of addresses with a balance >= 1k. Source: Glassnode

This is probably not a coincidence, as the reversal comes at a time when profit taking in the market is also close to the support line.

Current profit-taking behavior is in line with the 7 months trend

The amount of profit can be calculated by using the adjusted ratio between the selling price and the price paid for the part, excluding temporary movements of the part (movements of less than one hour).

In other words, aSOPR measures how many holders were at a profit (in US dollars) at the time they sold their coins.

Since September 2020, profits continue to find positive support at higher levels. This indicates that whenever sales have been made in the last seven months, sellers have been satisfied not to sell at a higher profit than in previous sales. But this trend may be coming to an end.

Bitcoin: Adjusted 10-day moving average of SOPR (aSOPR). Source: Glassnode

This metric that called the 2017 top is now flashing red

Profitable activity indicates that the market is at a tipping point

When we zoom out and look at the earnings-related behavior in all bull markets so far, it becomes clear that this is not a one-time or short-term trend, but a longer-term pattern in the bitcoin bull markets.

These support lines are usually maintained for 3 to 18 months. The chart below shows that a breakout of the second support line has historically confirmed a bull market top in every bull market.

Bitcoin: Adjusted 10-day moving average of SOPR (aSOPR). Source: Glassnode

This metric that called the 2017 top is now flashing red

Not only is aSOPR on the verge of breaking through 7-month support, but there is another key difference in the latest model of this metric that could be cause for concern.

Typically, aSOPR peaks higher in the short term each time the price continues to rise, and growing confidence encourages people to hold onto higher gains after each sale.

In the latter case, however, profits were made in every wave of selling over the past three months (see red arrow), a pattern that usually occurs after the top of a bull market has already been reached.

Momentary salesmen sitting at the wheel

The latter trend can be explained by a slower rise in prices in recent months and a larger number of short-term contract holders taking profits. This hypothesis is confirmed by the examination of the HODL waves that visualize the retention periods of bitcoins.

The redder the colour, the shorter the retention time. Clearly, short-term holders, who held bitcoins for a week to three months, were the ones who sold bitcoins most often at the end of the market.

Bitcoin: HODL waves. Source: Glassnode

This metric that called the 2017 top is now flashing red

Looking only at the behaviour of holders of short-term contracts (STH-SOPR), which are profit-oriented, it can be concluded that this group of operators is almost ready to sell. The recent drop below the 1 level shows that short term holders have started to realize losses.

In a bull market, this is usually the time when the bottom of the price is expected, as selling activity tends to decline significantly.

Bitcoin: Short-term SOPR support (24-hour moving average). Source : twitter.com/glassnode

This metric that called the 2017 top is now flashing red

However, since the tops of a bull market are not formed by a lack of sellers, but by a lack of buyers, it is also very important to look at current demand trends.

Current activity in terms of channel volume shows that the trend in capital inflows remains unchanged. A large number of coins are still changing hands, indicating that there is still buying activity. The realized price, which expresses this buying activity by valuing all bitcoins based on the latest daily movement, gives a good indication of the amount of capital that has flowed in and out of bitcoin.

Bitcoin: Realized price. Source: Glassnode

This metric that called the 2017 top is now flashing red

The steep curve indicates a large volume of transactions within the chain. When a lightning trend occurs, it usually indicates the beginning of a bear market, as there are no longer enough buyers willing to pay a higher price. As long as this steep curve doesn’t flatten, we don’t have to worry about a drop in the number of buyers.

While this indicates that the top of the bull market has probably not yet been reached, there is also no clear confirmation that sellers have just finished selling.

A breakout of the 10-day moving average support line aSOPR could be confirmed in the coming days. This could indicate a change in selling behavior from bullish to bearish. Therefore, a negative scenario in the short to medium term should be taken into account in this case.

Bearish support levels

There are two main levels of price support that you should look out for. The first one is around $51,325, which could be a strong support for the protection zone where Wale recently bought a large amount of bitcoins.

The second level of price support is the NVT (Network Value to Transaction Volume Ratio) price, which currently stands at $47,679 and is the main price support in the bitcoin bull markets.

If the market price were to fall significantly below the NVT price without recovering quickly within a few days, a detailed demand analysis would be required to assess a break in the bull market structure.

Market at critical level, strong support between $47K-$51K

On the supply side, it is currently sellers who are running the show and have even sold bitcoins at a loss in recent days. However, their trading activity is expected to decline significantly in the coming days if current behavior is consistent with previous selling in bull markets.

If not, a breakout of the 7-month aSOPR support line is likely and could signal a change in trend from bullish to bearish. Further declines should be expected at the next major support at $47,000-51,000.

On the demand side, capital flows still appear healthy. There is still enough volume willing to pay the current prices as the whales have ramped up their purchases again. The current price action is still above the NVT price, indicating that the current price action is still within the expected bullish range.

Nevertheless, keep an eye on the possible drying up of the channel’s volume in the coming days if the price approaches NTV’s.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Cointelegraph. Nothing here should be construed as investment or business advice. Past performance is no guarantee of future results. Every investment and every stage of trading involves risk. The author has bitcoins. You should do your own research and/or consult a financial advisor to make your decision.

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