Bitcoin Monthly Outlook

 Introduction  

This post is going to analyse the BTC price and attempt to predict the movement using On-Chain data and Technical Analysis. So enjoy.................. In the previous week, the Bitcoin market opened up to the significant news of Elon Musk's firm Tesla, purchasing $1.5 Billion worth of BTC as part of the companies balance sheet strategy. Immediately following the news, BTC/USD printed the largest daily candle in history, up a staggering $7,162 (+18.45% on the day). The market has lovingly named this the 'Elon Candle' [1]. He has indeed sent massive shock waves into the cryptosphere, and as a consequence we have seen a strong resurgence of retail interest in the space, increasing from an average of 2-3M of daily active users to 4-5M beginning of February.

The market held onto these gains, and has since rallied to new ATH of $49,485 after tagging an intra-day low of $43,909 along the way.  There is no doubt, 2021 continues to shape up as a very exciting year for Bitcoin.

The famous Elon Candle:

Understanding the state of the Bitcoin blockchain with respect to the price at which BTC is being valued by the market is indispensable for any investor in this asset. In fact, Bitcoin on–chain data has been used in conjunction with off–chain market data in order to create metrics and indicators that help investors gain fundamental insights into the current state of the market, understand investor sentiment, or model the value of Bitcoin. A good indicator for understanding this is  NUPL, for more information about the NUPL indicator see [2] 

Below we can see the GlassNode famous NUPL chart:

 
Net Unrealized Profit/Loss is the difference between Relative Unrealized Profit and Relative Unrealized Loss. Above we can see that BTC chart is about to hit Euphoria, which is an indicator for a BTC correction signal. 

BTC Reserves 

The balance of BTC held in exchange wallets has now been in a remarkable downtrend for over 12 months. The all time high for exchange balances occurred on 11-Feb-2020 (3.016M BTC) after which a total of 666.8k BTC have been withdrawn. This represents a 22% draw-down in exchange held coins leaving just over 2.346M BTC on exchanges [1].

Below we can see the BTC reserve drop from all exchanges from CryptoQuant:

Note: Above we can see the the BTC reserve only held on exchanges. Which shows that, even if the BTC performs a correction, in the long run, it looks like it is going to go up. And the HODLers are going to be the most benefited.

Below we can see the BTC reserve drop from all exchanges from CryptoQuant with the change:

Note From above we can see that from 1st of March 2020 we have a 23% reduction of the BTC reserves in all exchanges.

Below we can see the a multiple asset reserve drop from all exchanges from GlassNode:

Note: Above we can see the the percent supply held on exchange addresses for multiple assets, including the most popular cryptos. This tells us that there is going to be a shortage, not only on BTC, but in other assets too, such as ETH and LTC.

Roughly 635,000 BTC have exited exchanges since early 2020. It's predominately going to three areas:

1. The Prince of Pump Grayscale
2. Corporations/Institutions
3. DeFi

Below we can see the allocation of the GrayScale from GlassNode:

Note: The above diagram shows the amount of BTC holdings of the GrayScale Bitcoin Trust (GBTC).

Below we can see the market cap of the DeFi from DeFi Pulse: 

Note: The chart is for the 90 days. Some estimates claim that the DeFi market is going to hit 3b by the end of the year.

Exchanges Net Flow Volume 

It seems that the majority of the exchange net flow is mostly negative, so for now we are good.

Below we can see that net flow of all exchanges: 

The above chart show the difference of in volume flowing into exchanges and out of exchanges, i.e. the net flow of coins into/out of exchanges. 

BTC TA Insights 

BTC seems to build strong support lines, over the time at 29K and some minor support on 44k, below we can see a 1 day BTC chart from Tradingview:

Above we can see that BTC keeps printing accenting triangular shapes and both indicators (RSI and MACD with Fibonacci configuration) display at least short term upturned. A although 40% correction looks like a bad dream, still not impossible.

Again BTC seems to have a strong support line at 29K, in the 1 week BTC chart from Tradingview:

Here we can see that BTC keeps printing weekly accenting triangular shapes and both indicators (RSI and MACD with Fibonacci configuration) display at least short term upturned. 

What BTC Price Is Going To Do

So is this the top for bitcoin or just the beginning? To understand that lets take a step back and analyze the BTC bull cycle as a whole. The macro bull cycle starts with a reduction in on-exchange supply, which leads to a supply squeeze, as already demonstrated previously. Also new retail investors have entered the space of crypto and especially BTC as explained in the introduction. This can be proven also by the social media volume generated since early January 2021 (see below diagram).  

Below we can see the Social Volume chart from Lunar Crush. Lunar Crush is a community page with members interested in crypto space. Social Volume is a Lunar Crush metric that demonstrates social mentions (in this chart for BTC) for over a year:

Note: Above we can see an obvious increase of the volume of the retail investors interested. 

This can also be confirmed from the continuous increase in the total number of new market participants in the last couple of weeks.

Below we can see the GlassNode chart for new entities:

There are two major types of investors the retail investors and the institutional investors. In the long run the BTC price is determined only by the institutional investors, but in the short term, retail investors can affect the price. We also know that there are two sub categories the long term holders and the short term holders.

Below we can see the total supply held by short-term holders from GlassNode:

Below we can see the total supply in profit held by short-term Holders (30d Moving Median) from GlassNode:

Below we can see the total supply in profit held by long-term holders (30d Moving Median) from GlassNode:

The BTC at least until March is going to move upwards, the winners are the long term holders. The retail will push the price up for a short term period, but in the long run the financial institutions will prevail. The good news is that there are multiple institutions that use BTC as SoV and therefore this means that this in combination with the supply shortage will push the BTC price upwards to 65k easily by end of March. A 10% correction and an annoying retesting should be expected. 

The only thing that we should be concerned is two things:

• BTC is now a 1T asset and the need for regulatory requirement is mandatory. The question is how are the regulatory requirements are going to affect the BTC price.
• Tether (USDT) is under investigation, a potential ban of tether is going to create a monetarily sell pressure,that is definitely going to cause a price drop. BTC will recover, but short term holders and weak hands are going to sell.         

References: 

• glassnode.com [1]
• medium [2]
• https://bitcoinuncharted.substack.com/p/uncharted-3?r=do1bc&utm_campaign=post&utm_medium=web&utm_source=copy [3]