The Great Accumulation
Early bull markets are often signified with whale accumulation, and as prices eventually move higher, they use the liquidity of retail to begin selling down their coins and realizing profits.
The fact that whales are still buying and accumulating coins points to this being early in the cycle.
But it's not just the whales, every trader cohort is buying right now.
Nobody is selling.
We can also see this HODLing behavior by breaking down the spending of coins on-chain.
For this indicator, we're looking at the proportion of coins in wallets that haven't moved in over 6-months versus the rest. Seeing such high values in this ratio points to the cold storage of coins on the part of investors.
Long-term investors are HODLing their coins in private wallets, not taking them to market to sell.
Along with this accumulation, the amount of capital in the network has never been higher.
Realized cap is the on-chain equivalent to market-cap.
Instead of multiplying price by the current supply, realized cap sums the value for each coin when it was last moved. Translation: it measures the capital stored in the network.
It is interesting to note that the realized cap is higher than when prices were at the same level in April, pointing to the sustained capital inflows into the network.
When combined with the recovery of the hash rate and the growth of network users and active addresses, the state of the network is pretty healthy right now.
So with this all said, where do we go from here?
It's hard to be anything but bullish moving into 2022. If Bitcoin is above 65,000, that only serves to confirm all the action taking place on-chain, and it'd be plain irresponsible to not be positioned aggressively long in that scenario.
The next logical target would be 87,000, which given the tailwinds right now and the size of this base, we wouldn't be surprised to see that get swiftly achieved.
But of course, before that happens, Bitcoin needs to stick the landing and manage to absorb all this potential supply around its April highs.
While that's been taking place over the last few days, the derivative markets are becoming increasingly optimistic, and leverage is creeping back into the picture. On-chain trends can act as a leading indicator, but we also need to give the derivative markets the benefit of the doubt, as they tend to dictate short-term price movements.
This is what we outlined in yesterday's note:
With all this news discounted into the market, it seems like a classic “buy the rumor, sell the news” event could be underway.
The probabilities of a similar long squeeze that took place in September rise when rates remain positive for excessive periods. Especially with prices at overhead supply right now, it’s something to be wary of in the coming days/weeks.
We are seeing some levels of frothiness in the near term in the futures and options market.
Options volume and open interest across all exchanges have skyrocketed back to their highs earlier in the year following all the news surrounding Bitcoin's ETF approval.
Source: Glassnode
Exercising some caution right now is warranted if Bitcoin is below 65k.
Trade of the Day
We've been discussing all these names that are right above their first-half highs, and Cosmos is one of them.
This is a textbook contraction:
We like buying ATOM above 30, with an initial target of 47.
The same applies to Harmony. These two are really the same trade: own it above the first half highs, leave it alone if it's below.
We like owning ONE above 20 cents with an initial target of 0.33.
If this emerging bull market is the real deal, these high beta coins are likely heading much higher - something to keep in mind.
Weekly Chartbook
You can download this week's chartbook with our universe of coins and crypto stocks, as well as the levels we're watching by clicking here.
Be sure to let us know if you have any questions.
Allstarcharts Team.