Expecting Chopsolidation
The market isn't quite sure which way it wants to go, with HODLer sell-side subsiding, but no second wave of demand just yet. It feels like chopsolidation could be the most probable outcome.
I started analysing Bitcoin onchain data professionally for Glassnode in Feb 2021. My first day was just a few months before the $64k ATH in April, and a nasty -50% sell-off in May was looming just over the horizon, an event which turned the bearish tides.
When I started that role, I now had access to a world of new metrics and tools, but with hardly an idea how they worked, let along how to use them in a live market environment (few did). Suffice to say, I got a lot wrong, and the 2021-22 bear market taught me a lot.
There were several lessons I learned throughout that experience, but two that I wanted to surface today are:
Trust your instincts about the data, especially when the data disagrees with the narrative on twitter.
Understand the dominant mechanics, because the excessive leverage, plus GBTC going from premium to discount overshadowed everything else at that time (and I missed those data-points).
In one of my earliest editions writing The Week Onchain newsletter, I started exploring how Lifespan metrics like coindays destroyed were signalling that HODLers were slowing down their spending, and starting to re-accumulate (with bullish implications).
This was despite prices trading above $58k…and just 15-days from topping out. Here are two excerpts from WoC-13-2021 posted 29-March-2021 with BTC at ~$55k:
“The [Coindays Destroyed] CDD metric indicates that over the last three months, Old Hands have slowed their spending significantly. This week in particular, CDD has returned to levels similar to the early 2020 bull market baseline signalling HODLing is the preferred behaviour for old coins…
…Since the first major dip from $42k to $29k, we have seen a notable slow down in LTH spending. This, alongside strong signals of accumulation show a supply vs. demand balance that is unlike any bull cycle we have seen before.
In today’s post, I want to return to these familiar Lifespan metrics, to see if my three additional years of experience can help me get it right this time.
This is timely as right now we are once again seeing ‘older coins slowing their spending’ after a monster rally, and we could argue that is most likely constructive for price.
However, last time, this was actually a signal the market had topped out…Therefore, we need to dive deeper to establish whether this is a valid signal, or is it just like 2021, or if this time is in fact different.
