Data from Nansen showed that over the last 7 days Binance had some fairly significant outflows which was a worrying sign. They had $8.7B worth of outflows and only $5.1B in...meaning net outflows of $3.6B. For comparison, Coinbase had just under $1B in net outflows. Looking at Santiment's on-chain data there were around 54k Bitcoin moved off Binance in the last 24 hours. That's just under $1B worth of Bitcoin moving off the exchange ($966,600,000).

CZ tweeted that things seemed to have stabilized and that these withdrawals were not as high as some on days during the LUNA or FTX crashes. He went on to say he thinks it's a good idea to "stress test withdrawals". So we had a look at the last 24 hours' worth of on-chain data and it did seem that they had stabilized. They were now showing that there was more volume coming into the exchange than going out. $6.5B in over the last day and $6.1B out.

For context when FTX got into trouble they scrambled to process requests for withdrawals, which amounted to an estimated $6 billion over three days.

While Binance is currently seeing a high volume of withdrawals, the exchange still holds roughly $59 billion in assets at the time of writing, most of which are in Binance’s stablecoin BUSD, the stablecoin Tether, Bitcoin, BNB, and Ethereum. One thing to note here is that the BNB token, Binance's own cryptocurrency that powers its Binance Smart Chain, only makes up 10% of its reserves. Seeing as it has utility across the BSC and that it doesn't look like it's overly reliant on these assets it would seem to paint a very different picture than the one we saw at FTX with their FTT token.

CZ held a Twitter AMA and went on to say: CZ: If people want to withdraw their funds from Binance they can. It's their freedom. When they want to trade, they will deposit back. We hold crypto reserves and cash reserves one-to-one. We hold user asset reserves one-to-one. There's no amount of withdrawals that will put us under pressure.

From what we can see right now, it would seem that this is not a repeat of FTX and the exchange is in a good place. However we all know how quickly things can change so you know what to do if you want to be 100% safe, take ownership of your keys.

Strong XRP Accumulation

Over the past week, we have seen strong XRP accumulation. Wallets holding between 1,000 - 100,000 XRP increased their holdings by over 10% as did those who had between 100,000 and 10,000,000 XRP. Combined this was a 1.7B increase in XRP by existing holders. It's currently trading at 31p so this equates to just under $650m in XRP being bought by these holders in the last 7 days.

Ledger Defi

Ledger is integrating a new Defi tracker which connects to over 1,000 Defi protocols across ten blockchains. It's in partnership with Merlin, a decentralized finance (Defi) portfolio tracker. Users will have access to a range of performance metrics, P&L reports, gas spent, and calculated yields.

Storj is one of the decentralized cloud storage offerings that also include Filecoin, Arweave, and Sia. This group is competing with the current batch of centralized cloud hosting companies - AWS, Azure, and Google being the main ones.

What makes DCS solutions revolutionary is how decentralized they are in comparison to CCS solutions...which is good news otherwise they might have a branding problem. There are over 114x more active nodes running on Sia, Storj, Filecoin, and Arweave than there are data centers managed by AWS, Azure, and Google Cloud combined. The DCN options are also around 80% cheaper than the centralized competitors.

Each one of these DCNs has a native token that powers the blockchain and looking at volumes over the past 3 months Filecoin leads the way by some margin.

Filecoin also leads the way in terms of development activity by some margin. Generally a good indicator of longer-term health: the more development, the more evolution, and the ability to fix issues quickly. Of course, you need development teams all facing in the right direction and you need quality developers so it's not a metric that gives you absolute confidence on its own.

We've seen over the last year not all "crypto" companies are decentralized, although that's sometimes the assumption, especially from those outside our industry. And not all Web3 projects are decentralized as we've seen from some recent big NFT collections, such as Coachella, which had stored the assets associated with their NFTs on a centralized FTX server that went offline recently. So as we continue the drive towards further decentralization the adoption and usage of these DCNs will be interesting to watch over the coming years.

NFT Tax Harvesting

As we've mentioned in previous updates NFT trading volumes have dropped off a cliff. So I was looking at what some of the worst cases of value destruction were and Logan Paul came up. He bought an NFT from the Azuki collection for $623,000. It's now worth $10.

Ouch.

Anyway, there is a potential solution to reduce this pain slightly. And if any of you have bought expensive NFTs this might help as well. Coin Ledger is crypto and NFT tax software. They've come up with a good idea. They'll buy your worthless NFTs off you for next to nothing. When you dispose of your NFT for less than you acquired it for, you recognize a capital loss that can be used to reduce your taxable income for the year. This is a tax-saving strategy known as tax loss harvesting. By using this strategy Logan Paul could lower his capital gains for the year by up to $623,000 by harvesting his NFT loss.

Staking Apes

The Bored Ape Yacht Club coin ApeCoin shot up 6% as holders rush to take their coins and NFTs. Around $30 million worth of ApeCoin (APE) has been staked after its staking feature launched. Looking at the on-chain data the price in the last two weeks has risen nearly 20%. When you zoom out you see it's currently trading below $4 whereas in April of this year it was just under $24. However, even though there seem to be people excited by the prospect of staking their ApeCoin the active addresses and network growth were very low.

Coinbase Institutional 2022 Survey

Coinbase asked 140 institutional investors, representing AUM of about $2.6 trillion, what their future crypto investment strategy was...this is what they said:

Nearly two-thirds of those already invested in crypto plan to increase their holding over the next 3 years.

Those that are already invested in crypto are three times more likely to buy than those that haven't yet invested.

Uncertain regulation, volatility, and risk of market manipulation were top concerns.

And finally, more real-world applications was the most cited catalyst for growth. I think that is probably the one thing that will push the industry forward quickest.

With the continued move away from centralized exchanges we saw 24-hour trading volumes across Uniswap, dyDX, Dodo and Curve all up, some as high as 60%.

Uniswap in particular had some promising metrics this week as it registered the highest daily active addresses in more than a year.

GMX also saw active daily addresses climbing consistently through the last week in November. And finally, Optimism had a decent spike in the last days of the month.

This is backed up by looking at Ethereum and comparing the supply held by top exchange addresses against the supply held by top non-exchange addresses. The exchange addresses have seen a continued decline through November with 2m coins moving away. At the same time, the top non-exchange wallets have seen a steady accumulation of coins.

Solana NFTs

While in recent weeks we highlighted worrying on chain signals for Solana which included a big drop in development activity and a drop in Defi TVL by 70%. However, the Solana NFT data is still growing, with average transaction volumes increasing by 67%; the blue-chip index increasing by 28%. Solana still has considerable NFT projects, players, and communities. You can see more here: https://solanafloor.com/blue-chip

DappRadar data showed that some top Solana NFT collections, like y00ts and DeGods, saw massive sales in the past 30 days. According to the data aggregator, y00ts’ sales increased by 528%, and DeGods recorded a 324% increase in sales. Solana NFTs trading volume also increased 141% on OpenSea to $255 million and 62% on Magic Eden to $94.48 million.

Bitcoin

There are two sides to the Bitcoin story right now. The first is that in November we saw the fourth largest capitulation event on record, recording a 7-day realized loss of -$10.16B. This is 4.0x larger than the peak in Dec 2018, and 2.2x larger than March 2020.

The price of BTC has been trading below the Realized Price (which is the average price it's been bought for when looking at the whole market) for over 4.5 months.

But the other side of the story is that we are now in a phase of accumulation. From a comparative point of view, the recent strong accumulation score following the recent sell-off resembles that of late 2018. Among all holders, the entities with < 1 BTC (Shrimps) have recorded two ATHs of balance increase over the last 5-months. Shrimps have added +96.2k BTC to their holdings since the collapse of FTX and now hold over 1.21M BTC, equivalent to a fairly impressive 6.3% of the circulating supply. Is this a good indication that the bottom is finally in?

Digital Asset Fund Flows

Investment products saw outflows totaling US$23m in a continuation of the negative sentiment seen the previous week. There was mixed interest in short investment products as these saw a mixture of inflows and outflows. Blockchain equities are also suffering from the FTX collapse, seeing US$13m outflows last week.

A couple of interesting points:

• This time they didn't call them NFTs, they just referred to them as avatars

• Wallet creation and minting took place in the Reddit app, your wallet is called your vault

• They allowed the purchase of them in Fiat (not crypto)

Looking at the on-chain data we can see that 2.8 million people now have an avatar. To put that into perspective, OpenSea, the largest secondary NFT marketplace, has 2.3 million users.

There was a spike in Polygon on-chain activity in early August just after the launch as the Reddit crowd jumped on it and since then there's been steady accumulation. As interest picked up in the news over the last week the cumulative sales volume has jumped up and now stands at $7.95m. Of course, there are big chunks of the Reddit crowd who are very crypto-aware but it's not a stretch to say Reddit just onboarded a massive amount of new users into Web3 without them even realizing it.

Miners in a hole

The hashrate had been pushing to new all-time highs recently for BTC miners. This is a representation of the mining difficulty. By the way, did you know what miners have to do?

They take the previous block's number, add a random number to it (called a nonce), calculate its hash value, and then check to see if it's less than the previous one. That is done over and over again until someone finds a number smaller. So you could say that rather than solving a complex mathematical puzzle they are guessing a number. The one who does that quickest wins the race and gets to write the block and in return is awarded Bitcoin.

There is a model that looks at the hashrate and calculates the estimated average cost of production, and right now it's in line with the spot price of $19.3k. Meaning Bitcoin miners are only breaking even on their mining production. The previous two times the cost of bitcoin mining went above the price of Bitcoin, in both 2018 and 2019, it was bearish and signaled moves lower for the Bitcoin price which took months to recover from.

Exchange Exodus

The continued exodus of BTC from exchanges means that in October alone 123.5k BTC were withdrawn, this is equivalent to 0.86% of the circulating supply - that's quite a lot for one month.

Crypto being put on exchange is like you putting your car on Autotrader. You're seriously thinking about selling it.

Coins moving off exchange means they are less likely to be sold (quickly) so is a positive sign.

Short Term Holder Record!

We have an all time low! Bitcoin that is younger than 3 months old is just 11.51% of the total value which is the lowest it's ever been. Lows like this, over the past few years, have previously good signals of bottoms. 

If we go back to December 2021 there was just over $260bn in Defi TVL.

Today we have just over $76bn. We've lost $185bn in the last ten months - a 70% drop. And in that time we've had some big names fall and some characters that are still on the run and wanted in over 100 countries. No need to name names there.

If we go back two years Ethereum had 94% of all Defi TVL. Fast forward to today and it's just under 60%.

The Top 10 blockchains competing in the space have much more of a spread in terms of TVL. Tron is in 3rd place. Its TVL over the last year looks like what the technical analysis traders would call a Bart Simpson pattern - very up and down. But interestingly the largest protocol within Tron, JustLend, has doubled its TVL from $2bn to $4bn in the last five months bucking the overall trend.

In at number 6 is Optimism. Optimism is an L2 blockchain built by Ethereum developers, for Ethereum developers. Its pitch is you can build Ethereum dapps on there that function at 10x the speed. It looked like it was gaining some momentum over the past two months as it had decent increases in the number of active addresses, network growth, and stablecoins being used. All good signs. However, those metrics have all taken a bit of a hit over the last couple of days. This may well be due to a vulnerability that was found in a bridge between Optimism and BitBTC. This vulnerability was not in Optimism’s code, but rather in a custom bridge provided by BitBTC.

After four hacks recently, October is now the biggest month in the biggest year ever for hacking activity. So far this month, $718 million has been stolen from Defi protocols across 11 different hacks. At this rate, 2022 will likely surpass 2021 as the biggest year for hacking on record. So far, hackers have grossed over $3 billion across 125 hacks. Back in 2019, most hacks targeted centralized exchanges, and prioritizing security went a long way. Now a vast majority of targets are Defi protocols. Cross-chain bridges remain a major target for hackers, with 3 bridges breached this month and nearly $600 million stolen, accounting for 82% of losses this month and 64% of losses all year.

To leave you with some good news, development activity seems unaffected. The Ethereum SDKS, software development kits, which developers use to build with are now getting 1.5m downloads per week. That has steadily increased year on year and is now 10x what it was four years ago. We might be in a bear market but the builders continue to march on.

I got sent a report today that whales have been depositing coins at centralized exchanges at an increasing rate. This is usually interpreted as foreshadowing a potential sell-off as holders are ready to press the sell button. That doesn’t mean that the decision to sell has been taken, but gives the ability to execute quickly looks favourable to some.

So I looked into the data. Firstly this outlet had defined as wallets holding between 100 and 1,000 BTC. Glassnode, and others, generally define whales as holding over 1k BTC. Secondly, it was very hard to actually see how much BTC had been deposited. From their low fi graph (below), it seemed to be around 1.5k BTC. So I decided to cross-check this information.

Starting with Santiment I looked at Exchange Flow Balances and this backed up the story showing we've had net inflows in the last two days, totaling just under 3k BTC (this figure was total movement onto exchanges not just whales). However over the last couple of weeks overall, there have been net outflows.

I cross-checked that data with Glassnode, and they show that over the past few weeks there have been net whale withdrawals of 15.7k BTC.

Finally, I looked into the supply of BTC on exchanges as a % of the total supply and found that this currently sits at 8.7%. The lowest percentage in four years, the last time it was this low was in November 2018. In the past year the supply on exchanges, as a % of total supply, has dropped from around 12% to 8.7%.

So my conclusion is that yes there are some movements onto exchange, but at the moment it's not looking like that much and overall we've had Whale outflows over the past few weeks.

The BTC Halving & Price Cycles

Looking at the halving events in BTC we can see that historically they have been after the lows for the cycle and seem to form a sort of stabilization point before the price rises dramatically. If we get a repeat of the past then at the next halving, scheduled for sometime between February 2024 and June 2024, the price would be around $40k and set up for another big bull run.

This is backed up by analyzing the short-term holder cost basis against the long-term holder cost basis which we discussed last week. The short-term holder cost basis, which is the average price that a short-term holder of Bitcoin bought for (those holding under 155 days). And the long-term cost basis, which is the average price that long-term holders of Bitcoin bought for (those who have held over 155 days). Now, the short-term holder cost basis dropped below the long-term holder costs basis for only the fourth time in history. In other words, those who are just entering have a better cost basis than those who have weathered months of volatility. This is a direct outcome of LTH capitulation, where coins purchased near the cycle top are sold and change hands at much lower prices.

This indicator has historically happened near the bottom of price cycles. Two weeks ago, the market entered this stage and compared to prior bears, has taken between 145-days and 339-days to recover. This lines up very nicely with the halving projections.

A Psychologically Important Price?

One last thing to note is the whale cost basis - what is the average price that whales bought for? This was done by price stamping the deposits and withdrawal volumes of the whale cohort (1k+ BTC) to/from exchanges and estimating the average price of Whale Deposits/Withdrawals since Jan-2017.

This currently sits at around $15.8k. So that might be a psychologically important price point if we drop further.

In the third quarter of 2022, there was a 12% increase in unique active wallets across the cryptocurrency ecosystem compared to the previous quarter.

The blockchain Gaming sector contributed significantly to this as did Immutable X.

What is slightly more surprising is that the number of NFT trades was up by 11% from the second quarter of 2022.

BUT NFT trading volume, in terms of dollar value, has been decimated.

NFT monthly volume in dollar value is down:

• 67% from Q2 2022

• 97% from January 2022

Ethereum

Ethereum is deflationary!! Well, it is if you look at the metrics for the last hour. But even over 7 days, it's only sitting at 0.13% so very nearly there as well.

Bitcoin

The Short-Term-Holders’ Cost Basis Crossed Beneath The Long-Term-Holders’ Cost Basis For The First Time Since Late 2018.

This is a signal usually correlated with high-conviction market bottoms. Likely a sign of low speculative excesses, this cross suggests that short-term holders have capitulated or are aging into long-term holders.

Chainlink

Who provide data to blockchain smart contracts and have Former Google boss Eric Schmidt as an advisor are growing.

They measure TVE which is the aggregate monetary value of transactions facilitated by their data.

They have some impressive numbers.

SWIFT, the interbank messaging system that allows for cross-border payments, is working with Chainlink, a provider of price feeds and other data to blockchains, on a cross-chain interoperability protocol (CCIP) in an initial proof-of-concept.

CCIP will enable SWIFT messages to instruct on-chain token transfers, helping the interbank network to be able to communicate across all blockchain environments.

The financial payment network SWIFT has been trialling CBDCs with a view that once completed banks may only need one main global connection rather than the thousands they have right now. 

Around 90% of the world's central banks are now using, trialling or looking into CBDCs.

But this year SWIFT cut off most of Russia's banks from its network after the West imposed sanctions due to the war in Ukraine. So we can already get a glimpse into what the future might look like in terms of controlling access and being able to shut off entire nations which is a very big worry for a lot of us in the space.

The New Entities metric is a measure of network adoption. It's currently at around 83k new entities coming online per day, which is a new low for the 2020-22 cycle but remains higher than the 2018 bear market low, which dropped to 66k new entities per day.

We also know median transfer volumes are low, these are the ones that represent retail investors more accurately. We know that miner revenue is low - miner revenue is directly related to the level of demand for block space and thus network usage.

Who is Selling their Bitcoin?

Well, it's not the ones who have been holding Bitcoin for 6 months or longer. The hodlers (6-months+) represent only 0.4% of the coins being sold. This is a long way off the copious 8% at the height of the bull in Jan 2021. 

This is backed up by other on-chain metrics showing that the longer-term hodlers are holding steady. One of those is the 90-day Coin Days Destroyed (CDD-90) metric. This assesses the total sum of coin day destruction over 90 days. What that means is this metric works out the total number of days Bitcoin had been held before selling, across all sales, over 90 days.

So for the sake of an example, let's say that 10 Bitcoin were sold in that time, and each one had been held for a year, the metric would be 365 * 10 = 3650. However, if 10 Bitcoin were sold and each one had been held for 30 days it would be 30 * 10 = 300. So, when this is low it's showing the people selling have not been holding their Bitcoin for long, i.e., short-term holders.

This metric is the LOWEST it's been in over 10 years.

Bitcoin Address with more than 1BTC at ATH

Bitcoin wallets with more than 1 BTC in them just reached an all-time high. There are now over 900,000 wallets with more than 1 BTC in them. 

VeChain 700k Transactions

VeChain collaborated with a China-based subsidiary of Walmart to develop a blockchain traceability platform, on VeChainThor. The platform, as designed, scales at least 100 product lines in about 10 product categories. This helps to “implement a traceability strategy for products and pioneer the large-scale application of blockchain traceability.”

VeChain has claimed to process almost 700k transactions for the biggest company in the world Walmart in just over 3 hours. That equates to 64 TPS. Not too bad but not mind-blowingly good either. 

CryptoPunks #2924 sold for nearly $4.5m

It’s one of just 24 apes in the entire CryptoPunks collection, which spans 10,000 unique NFT profile pictures. CryptoPunk #2924 was sold by a notable pseudonymous NFT collector seedphrase, although it’s not immediately clear who the buyer was. I looked at the seller's wallet, using DappRadar, and they've got a mere 1105 NFTs worth $9m. 

Was there something big happening this week? Ahh yes, the Merge. While sort of anti-climatic in terms of what happened on the day, it was a big event with regard to the future of crypto. 

So big that Google incorporated it into its search results.

The Environmental Narrative

Worldwide electricity consumption has (allegedly) dropped by 0.2 percent after Ethereum, the world’s second-largest cryptocurrency, switched to a “green blockchain”, according to Ethereum researcher Justin Ðrake. That is going to make some attention-grabbing headlines out in the wider marketplace.

Pre Merge Institutional Investment

There were some investor jitters along with potential forked tokens which led to outflows of ETH from lending platforms in the days running up to the merge. But institutions and deep-pocketed “whales” have been accumulating and staking, signaling confidence that the Merge will be successful and that it will deliver yields going forward. Given there's not much else out there that will right now it's a decent bet.

Post Merge Short Positions

Traders on the other hand have been increasingly shorting ETH in anticipation of a sell-the-news event. Something we've mentioned a few times over the last couple of weeks as it looked like an increasingly likely outcome. However, a consistently negative funding rate also increases the possibility of a short squeeze. 

So what happened?

We saw ETH drop by around 10% in what seems to be a "sell the news" event playing out. 

Concerns around Decentralization

According to a Santiment Ethereum Post Merge Inflation dashboard, 46.15% of the proof of stake nodes for storing data, processing transactions, and adding new blockchain blocks can be attributed to just two addresses. This heavy dominance by these addresses is something to watch especially given the current discussions around centralization in Lido staking well. 

Future On Chain Numbers

One thing that will be interesting to keep an eye on now is some of the on-chain metrics, especially comparing them to the leading cryptocurrency Bitcoin. 

Unique addresses (with a non-zero balance):

• Ethereum 86m 

• Bitcoin 43m

Last 12 months' fees:

• Ethereum $8,960m 

• Bitcoin $192m

Ethereum has twice as many unique addresses and 46 times the "revenue". I think there's a strong argument for institutional money to continue flowing into Ethereum now given the potential deflationary impact and environmental investment narrative. The next few years will be interesting.

292,000 bitcoin have now been wrapped onto Ethereum. This represents approx. 1.4% of its current circulating supply (source: The Block).

What are wrapped tokens and why would you do it?

Well, different blockchains have different protocols and functionality. We are certainly not at a place of widespread interoperability...although that is probably the goal.

So if you own some Bitcoin how do you make use of it in Defi? You wrap it. This essentially means you give your BTC to a third-party custodian, they store it in a vault somewhere, hopefully secure, and provide you with a new version that can be used on the blockchain you want.

For example, if you wanted to use your BTC on Ethereum you would need it to be converted to an ERC-20 token, if you wanted to use it on Binance it would need to be a BEP-20 token.

You get the same amount you stored with the custodian in a new format called WBTC. You can then lend your Bitcoin on the alternate blockchain and gain a return. When you're ready you can exchange it back for the original token.

What does this tell us?

That more people are choosing to use their Bitcoin and get returns (or utility or sorts) outside the Bitcoin network. Over the last year, the number of wrapped Bitcoin has been steadily growing even though the price has been declining. In August/September 2022 we have seen a slight decline so it will be interesting to see what happens over the coming months.

A rare event

The realized price of Bitcoin is the average price. It’s the value of all bitcoins at the price they were bought, divided by the number of bitcoins in circulation. We can refine this further by just looking at specific cohorts, for example, 1-2 year holders.

When we look at this group we see there have only been 2 times in history the price of Bitcoin has been below the realized price for 1-2 year holders. We are currently in the 3rd time now. What followed these periods is parabolic price runs. The question is will history repeat itself and when?

Electric Growth

The lightning network continues to grow in capacity even though the price of BTC has been steadily falling. Network usage and utility here could be building momentum.

XRP Activity

XRP whales recorded a three-month high in network activity as the token continues to fight the general economic storms and low prices.

According to Santiment, transactions over $100,000 on the XRP ledger suddenly skyrocketed to levels not seen since May.

“XRP is seeing notable whale activity, as well as high optimism, in Friday’s closing trading hours. We’ve picked up a spike of $100,000+ XRP transactions that hasn’t been equaled since May 13th. Additionally, sentiment is at its highest since April.”

Now the other stuff

Someone decided enough was enough and sold a LOT of Bitcoin. The good news for them is they made $95m. The not-so-good news is it could have been more than three times that amount had they sold nearer the top.

The Big Short

Michael Burry aka The Big Short aka Mr. Positive is back on Twitter and giving us his views, the latest being that we are NOT at a bottom just yet.

And although I've been saying we are near a bottom in recent weeks, going by the on-chain data, when you stop to think that here in the UK we're about to go into a colder season and people will need their heating on, which will in turn push up their energy bills - even if there's reductions in the price of energy - we are more than likely entering a very sticky patch and there probably is more pain to come.

Finally

GfK’s Consumer Confidence Index (carried out on behalf of the European Commission) measures a range of consumer attitudes, including forward expectations of the general economic situation and households’ financial positions, and views on making major household purchases.

The index fell to -44 in August 2022, down by three points from -41 in July to the lowest point since the index began in 1974. It has now been at a record low for four successive months.

With household wallets squeezed new money coming into crypto will more than likely be from institutions and it feels like right now that we are really at the mercy of the war in Ukraine which is potentially the single biggest single factor across all markets.

On chain data gives us interesting insights into market psychology, particularly between long term holders (LTH) and short term holders (STH).

As bull markets march forward and the price increases, the number of new entrants increases. As the price increases people get very excited. So what happens? Well eventually you hear from Dave, your plumber, that he's going to buy crypto. It's at that point, if you want to lock in profits, you should be selling. New entrants are sometimes referred to as dumb money. I'll let you make your own mind up as to whether or not that's fair.

Nearing tops, as the hype continues and the prices keep climbing, the older more experienced hands then tend to start selling. And if enough of that occurs the price starts to come down.

Now who's most likely to sell when the price drops from all time highs?

Unfortunately for them it's new entrants - the people who have just bought in and around the top - typically panic selling at a loss.

Fast forward to today there are a core group of Long Term Holders that are not selling and seem to have strong hands. Almost all short term holders have been flushed out.

The supply held by long term holders stands at 13.5 million which is very close to an all time high.

However because of that and tricky market conditions we are seeing some Long term holders of Bitcoin, those that have held for 155 days or more, and are statistically the least likely to spend, selling and realising losses between -35% and -40% on average.

As per the other metrics we've covered in recent weeks this is in line with the bear market of 2018 except that right now we have a much more volatile macro environment.

All on chain metrics point to us being in or around a bottom for this cycle, should this cycle repeat a similar pattern to previous cycles. That of course does not mean we can't go lower and how long we stay here really depends on other factors including the war in Ukraine which is connected to energy prices which is connected to inflation.

Whale movements

Another interesting area to observe is what the whales are doing - those that hold significant amounts of a cryptocurrency. What we saw in the last week or so with Ethereum was that the supply held by top non-exchange addresses (whales) dropped by quite a large amount around August 18th.

We crossed checked this with exchange ETH balances and saw an increase at the same time. So this looks to be whale accounts moving ETH onto exchanges in preparation for selling. And it certainly seemed like some of these whales did sell.

The data in the week following that move shows that whales started accumulating again and nearly reached the levels prior to this move. The price of ETH dropped just after whales moved their coins to exchanges…so if the same whales that sold then rebought they would have certainly bettered their position. Maybe this was profit taking during a choppy market or maybe this was positioning ahead of the merge.

My on chain adventures this week were triggered by an article from a crypto news outlet, I won't name names, which stated that BTC exchange inflows had seen large spikes in recent days from whales.

Now exchange movements are interesting as is the behaviour of whales - those who hold 1k BTC or more. Exchange movements, either inflows (that is onto exchanges) or outflows (off exchanges) give us some indication of potential future behaviour.

Coins moving onto exchanges are seen as increasing the likelihood of selling behaviour. Which makes sense as you would need to do this in preparation for a sale.

And the reverse is true...coins moving off exchanges, typically into cold storage, is seen as increasing the probability of hodling. You are less likely to sell right now if you've moved your coins to a place it's harder to sell them from.

It’s All On Chain

On a side note I find the terminology amusing..as the coins are not actually moving anywhere of course, coins are stored on the blockchain where you can see them. Your private key is what moves between exchanges and your other wallets including cold storage.

Anyway, back to the article. When I cross referenced the data with a very well known blockchain data analysis tool it didn't seem to match up. Not only were the numbers a little different to ones I was looking at, I realised their time frame was very short. They were showing data from the last few days however when I zoomed out these spikes were very small when compared to others earlier in the year.

In addition to that it looked like they had included Bitcoin holders that have between 100-1000 Bitcoins which generally wouldn't go into the whale cohort. As mentioned at the beginning whales tend to be holders of 1k BTC or more.

The lesson here...be careful of sensationalist headlines, created to get maximum clicks, and validate information where possible.

Buy the Rumour, Sell the News

In terms of Ethereum and exchange data we have seen recent net outflows from exchanges however the largest Ethereum holders (who are not exchanges) have sent a significant amount of ETH onto exchanges...which is one bearish data point for the Merge.

There is increasing noise that the September 15th Merge might well be a buy the rumour sell the news event. We will have to wait and see. If you want more information on the Merge we have an insight report available.

e: tom@comparative-linguistics.com

www.comparative-linguistics.com

If you are interested in another view on inflation then checkout the Truflation site. They pitch themselves as independent, economic & financial data in real time on-chain. You can see more here and make your own mind up: https://truflation.com/

ATH Drops

Drops from all time highs (ATH). We know we've had some big ones but has all activity also reduced? It seems not. While the Bitcoin price is down 66% from its ATH in November 2021 the number of active addresses with a non zero balance are up 10% in the same time period.

And while the Ethereum price is down 62% from its ATH (in November 2021) the active addresses with a non zero balance are up 26% in the same time period.

If you're interested Coingecko has page which shows a good selection of crypto's and their price from ATH - https://www.coingecko.com/en/watchlists/all-time-high-crypto

Coin Maturation

The number of BTC that has been held for between 1-2 years has doubled in the last year. These coins are maturing which indicates medium term HODLING behaviour and conviction from this cohort.

Have we seen the bottom?

The Bitcoin MVRV, this is simply the ratio comparing the Market Cap / Realised Cap, is useful for getting a sense of when the price is below “fair value” and is also quite useful for spotting market tops and bottoms. In all previous bear markets this metric dropping below 1 has signalled a bottom. Interestingly we dropped below 1 in June of this year and we've just come above 1 in the last couple of weeks. If the trend continues, and what's happened in previous cycles repeats, then this would signify we've seen a bottom.

Of course the market is evolving and changing, so we can't be sure what's gone before will repeat again, however putting this together with other metrics helps paint a picture which we can make far more informed decisions from.

Who dominates Bitcoin network transactions?

Finally, in terms of transactions the Bitcoin network is dominated by large transfers of $10m plus. These make up over 60% of all transfers and seem to indicate the scale of institutional adoption. Over 60% of the Bitcoin network is made up of entities holding over 100 Bitcoin...right up to Microstrategy which holds just under 130k Bitcoin.

You don't have to look far to see the scale of institutional adoption across blockchain as a whole and I'm sure many will be seeing this drop as a great opportunity to continue that trend.