Bitcoin Inscriptions Cool, Trading Heats Up: What’s Next for the Market?

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As bitcoin (BTC) consolidates below the mid-point of the 2021-22 cycle at $30,000, some on-chain activity metrics are calming while others, such as money transfer volumes, are rising. According to a recent report, this indicates a positive momentum and growing acceptance for the asset reports from glassnode.

Bitcoin metrics suggest a wild ride ahead

The report notes that BTC’s recovery in 2023 has been remarkably strong in terms of price performance and network usage, indicating strong underlying demand for the asset.

The speed of active addresses is on the rise again, indicating a healthy network and growing acceptance of bitcoin. The balance of supply held in profit versus loss has reached an equilibrium point, which in previous cycles is synonymous with a long ‘re-accumulation period’ of several months.

Furthermore, the report shows that the amount of BTC being transferred has started to increase meaningfully. BTC changes hands, up 75% from FTX low, total settlement now reaches $4.2 billion per day. This is a positive sign for the bitcoin network, indicating a return to BTC monetary transfer dominance.

The report also provides a chart showing a significant supply cluster between $15,000 and $30,000, indicating that many coins have changed hands over the past 12 months.

In contrast, only 25% of the supply acquired at prices above $30,000 was held by buyers from the 2021-22 cycle.

Furthermore, long-term and short-term speculation suggests that a significant amount of supply for long-term holders (LTH) was acquired between $15,000 and $25,000 and has not been spent despite prices reaching $31,000. Additionally, almost all coins with an acquisition price above $30,000 are held by LTH, which is likely to create resistance if the market moves higher.

Furthermore, the report also highlights that despite regulatory pressure in the US, the accumulation has seen expansion in the price range between $20,000 and $30,000 since February. This supply distribution is quite ‘bottom-heavy’, suggesting that a relatively strong foundation for investor holdings exists below $30,000.

BTC’s Independence From Altcoins Is Growing

Bitcoin’s correlation with altcoins to decline in first half of 2023, according to one reports By cryptocurrency market data provider KAICO.

Reports suggest that altcoins have been hit hard by growing regulatory uncertainty in the US, with several exchanges delisting major altcoins over the past few weeks. In contrast, bitcoin has shown resilience, attracting institutional inflows and benefiting from regulatory clarity regarding its status as a commodity.

The report notes that bitcoin’s correlation with other major cryptocurrencies, such as Ethereum, Litecoin, and Bitcoin Cash, has declined significantly over the past year.

The drop in correlation is a sign that bitcoin is becoming less affected by the movements of other cryptocurrencies, indicating that it is starting to establish itself as a more independent asset.

XRP saw the strongest decrease in correlation, which is associated with increased volatility of the coin as the outcome of the SEC vs. Ripple lawsuit approaches. The report suggests that XRP’s volatility has increased significantly in recent months, causing it to fall heavily in correlation with other cryptocurrencies.

The report suggests that bitcoin’s resilience in the face of regulatory uncertainty is largely due to its status as a commodity, which has been confirmed by regulatory bodies such as the Commodity and Futures Trading Commission (CFTC).

On the one-day chart of BTC, the largest cryptocurrency in the market is currently trading at $30,500, showing an increase of 0.9% over the past 24 hours.

Featured Image from Unsplash, Chart from Tradingview.com