{"id":22580,"date":"2023-03-06T14:46:10","date_gmt":"2023-03-06T22:46:10","guid":{"rendered":"https:\/\/coinnetworknews.com\/bitcoin-price-enters-transitional-phase-according-to-btc-on-chain-analysis\/"},"modified":"2023-03-06T14:46:10","modified_gmt":"2023-03-06T22:46:10","slug":"bitcoin-price-enters-transitional-phase-according-to-btc-on-chain-analysis","status":"publish","type":"post","link":"https:\/\/coinnetworknews.com\/bitcoin-price-enters-transitional-phase-according-to-btc-on-chain-analysis\/","title":{"rendered":"Bitcoin price enters ‘transitional phase’ according to BTC on-chain analysis"},"content":{"rendered":"
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The hopeful optimism of Bitcoin (BTC<\/a>) traders seemed to dissipate in the first week of March as key on-chain metrics provided resistance.<\/p>\n

Now Bitcoin price<\/a> is threatening a retest of the $22,000 level and a wave of short sellers would stand to profit if that occurred. If the short sellers\u2019 strike price hit, some analysts believe<\/a> Bitcoin price could drop as low as $19,000. <\/p>\n

Bitcoin options by strike price. Source: Coinglass<\/em><\/figcaption><\/figure>\n

A handful of analysts still project BTC price to hit $25,000 in the short-term, on-chain data highlighting a few reasons for price resistance at higher levels.<\/p>\n

Realized price metric highlights profit-taking <\/h2>\n

Market participants\u2019 concern over the Federal Reserve\u2019s interest rate hikes and high inflation are heavy macro headwinds facing Bitcoin price and this has investors weighing the time value of money<\/a> of BTC investments. To measure TVM on-chain, Bitcoin holders can be put into groups based on the amount of time they held BTC and average the acquisition cost. <\/p>\n

Investors that purchased BTC within the last 6-months benefited from the early bear market conditions and have an average realized price of $21,000, which places them in profit. The average market realized price across all BTC holders is $19,800, also currently in profit. <\/p>\n

Conversely, BTC held for over 6 months has a higher realized price than the rest of the market groups at $23,500. When Bitcoin reaches above $23,500, the holders that have seen little TVM return for over 6-months potentially put pressure on a breakout as they get antsy to lock in profits. <\/p>\n

Bitcoin supply cost basis by time held. Source: Glassnode<\/em><\/figcaption><\/figure>\n

Liquidity inflows increase but pale in comparision to 2022<\/h2>\n

Bitcoin price is highly reactive to interest rates<\/a> and the U.S. Dollar Index<\/a> (DXY) which puts a strain on risk assets<\/a>. The negative impact of these factors is great for short sellers butbad for Bitcoin price. The best way for the Bitcoin price to withstand short-seller pressure is for new long liquidity and spot buyers to enter the market. <\/p>\n

Analyzing exchange net flows is a good way to measure new liquidity and currently this metric reflects a 34% uptick since the start of 2023, but it lags behind the yearly daily average of $1.6 billion. <\/p>\n

Bitcoin exchange volume. Source: Glassnode<\/em><\/figcaption><\/figure>\n

Currently, the general consensus among analysts is that the ability to onboard new liquidity<\/a> into the crypto market has been hindered by a crackdown on banks that support crypto-oriented businesses. <\/p>\n

The uptick in unrealized Bitcoin profits mirrors previous cycles<\/h2>\n

While some Bitcoin investors were realizing profit, positive on-chain signals appear when looking at the Net Unrealized Profit \/ Loss metric (NUPL). The NUPL metric shows the difference between unrealized Bitcoin profit and unrealized loss within the BTC supply. <\/p>\n

According to Glassnode, NUPL metrics on March 6 show<\/a>:<\/p>\n

\u201cSince mid-January, the weekly average of NUPL has shifted from a state of net unrealized loss to a positive condition. This indicates that the average Bitcoin holder is now holding a net unrealized profit of magnitude of approximately 15% of the market cap. This pattern resembles a market structure equivalent to transition phases in previous bear markets.\u201d<\/p><\/blockquote>\n

Bitcoin NUPL. Source: Glassnode<\/em><\/figcaption><\/figure>\n

While Bitcoin\u2019s 2023 momentum may have taken a pause in mid-February and many headwinds<\/a> remain, there are positive signs that the transition out of the deepest phase of bear market is near. <\/p>\n