Crypto Updates

Bitcoin Rally Sustainable? On-Chain Data Provides Crucial Insights

Bitcoin RHODL ratio

Bitcoin has been trending up since hitting a local low below $25,000 on September 11th. Yesterday’s rally to $27,435 marked a 10% increase from the recent low. As NewsBTC reported, the rally was largely led by the futures market and a massive increase in open interest of over $1 billion, more than half of which was flushed out when BTC fell back below $27,000. Despite this, BTC is up around 7.5% from last week’s low. A reason to be bullish?

Glassnode Report Sheds Light On Market Sentiment

According to Glassnode, the Realized HODL Ratio (RHODL) serves as a crucial market sentiment indicator. It measures the balance between investments in recently moved coins (those held for less than a week) and those in the hands of longer-term HODLers (held for 1-2 years). The RHODL Ratio for the year 2023 is flirting with the 2-year median level. While this indicates a modest influx of new investors, the momentum behind this shift remains relatively weak.

Bitcoin RHODL ratio
Bitcoin RHODL ratio | Source: Glassnode

Glassnode’s Accumulation Trend Score further elaborates on this trend. It shows that the current recovery rally of 2023 has been significantly influenced by investor FOMO (Fear of Missing Out), with noticeable accumulation patterns around local price tops exceeding $30,000. This behavior contrasts sharply with the latter half of 2022, where newer market entrants showed resilience by accumulating Bitcoin at lower price levels.

Bitcoin accumulation trend score
Bitcoin accumulation trend score | Source: Glassnode

The Realized Profit and Loss indicators also reveal a complex picture. These metrics measure the value change of spent coins by comparing the acquisition price with the disposal price. In 2023, periods of intense coin accumulation were often accompanied by elevated levels of profit-taking. This pattern, which Glassnode describes as a “confluence,” is similar to market behavior seen in peak periods of 2021.

An assessment of Short-Term Holders (STH) uncovers a precarious situation. A staggering majority, more than 97.5% of the supply procured by these newcomers, is currently operating at a loss, levels unseen since the infamous FTX debacle. Using the STH-MVRV and STH-SOPR metrics, which quantify the magnitude of unrealized and realized profits or losses, Glassnode elucidates the extreme financial pressures recent investors have grappled with.

Market Confidence Remains Low

The report also delves into the realm of market confidence. A close examination of the…

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