Analysis of the price of bitcoin, the week of July 5 to 11, 2021

We are still within the stability period that began on May 19 and that continues to this day. It seems that bitcoin is not in a hurry to get out of this channel and also the price variations are less and less. Investors are the ones who are impatient for the price to break out of these $ 30,000 to $ 40,000 margins so that there is greater volatility and they can maximize (or minimize) their gains (or losses). 

The week started with a price of $ 35,880 and ended at $ 34,478, which represents a decrease of 3.91% and although in other markets it could be a notable correction for bitcoin, it is not a relevant value.

BTC trading volume this week is very low, which is not good news and this poor move encourages price stabilization. A high trading volume tends to drive the price up or down, but from what it seems institutional investors who had entered strongly in the past are now neither buying nor selling BTC, which does not help the price rise. 

Price stability conforms to existing Greed and Fear sentiment posted at Fear and Greed Index where we move between 29% fear on Monday, July 5, and 20% on Sunday.

The biggest news of the week has a more negative than positive tint. 

  • Breaking news: Binance suspends bank transfers in euros amid regulatory pressure
  • China puts Binance on the list of banned websites in the country
  • Iran’s legal miners are asked stop the machines
  • TikTok will no longer allow cryptocurrency ads
  • The unlocking of some GrayScale actions that will occur this week which generates great uncertainty about how investors will act.

The indicator of the week, Liveliness

Liveliness is a metric that shows changes in savings behavior and indicates the long-term trends of hodlers with respect to the accumulation or spending of BTC.

The formula applied to calculate this indicator is the following:

Bitcoin Liveliness = (ΣCoin Days Destroyed) / (ΣCoin Days Created)

Where Coin Days Destroyed (CDD) indicates the total number of coin-days destroyed. 

Every day that a unit of currency is not spent, a “day of currency” is added. 

When that coin is finally spent, the accumulated coin days are zeroed (destroyed) and the CDD metric is recorded.

What the CDD indicator monitors is the life expectancy of spent bitcoins, a high CDD value means that older BTCs are moving / spending.

What the behavior of the Liveliness metric indicates: 

  • When Liveliness decreases, a high proportion of the BTC supply is idle (Hodl is being done) and that is because the global accumulation of coin-days exceeds the coin-days destroyed in the activity of chain.
  • When Liveliness has a lateral trend, the destroyed coin-days are equal to the accumulated coin-days from the circulating supply.
  • When Liveliness increases, long-term holders are spending old coin-days and they exceed the accrual rate of coin-days.

Glassnode’s Liveliness chart shows us that Liveliness is decreasing which means that we have entered a BTC accumulation zone and that it will be good for the price in the medium term. The low trading volume this past week helps Liveliness to be low.

On the tsypruyan website there is a graph of Liveliness behavior. 

Changes in the UTXO Realized Price Distribution (URPD)

In the graph “Bitcoin UTXO price histogram change, 30d” from @tsypruyan shows bitcoin purchase price ranges compared to 30 days ago.

The blue + pink bars indicate the current UTXO set and the blue + purple bars the situation 30 days ago.

Examining the chart, it is observed that a buy zone is being created, which will represent a price resistance zone around $ 33,000 and that has been fed mainly by UTXO in the $ 38,000 range. The fact that mainly the purple bars are to the right of the pinks assumes that bitcoin users are selling it at a loss as they bought more expensive and are selling cheaper as indicated by the SOPR metric. 

The Puell Multiple metric

We recall that the Puell Multiple indicator that historically has always shown us the good times of purchase is not 100% reliable in the current situation since the drop in the hashrate is produced by the migration of many of the miners from China by government order, it is not a decrease caused because they are entering losses due to a drop in price but because they are being forced to move the machines from China to other countries, such as the USA, Kazakhstan …

Logarithmic adjustments for the price of BTC

There are more logarithmic adjustments to the price of bitcoin than the famous Stock To Flow (S2F) such as the Bitcoin Rainbow Price that is based on making an adjustment of the price of BTC to a logarithmic curve, was initially carried out by Trolololo on October 22, 2014 and exposed it in the forum by Bitcoin Talk and although it was widely criticized for being excessively optimistic, it has been fulfilled like clockwork. Like the S2F there will come a time that will cease to be law but to date the price has followed this exponential trend. 

In the case of Bitcoin Rainbow, the yellow line shows us normality and the orange and red lines that BTC is oversold, which is why it is interesting to sell and the green and blue lines that are overbought and must be accumulated.

In the future

Patience is the mother of science, there is no rush for bitcoin to appreciate, at the moment the price is building at levels close to $ 35,000 and a resistance is forming that in the future can avoid it falls below this level. 

You have to watch the trading volume that this week has been very low, which may mean that bitcoin holders do not want to sell but in general it is not good news because a more lively market means more liquidity, more interest in the currency for part of investors and more chances of sudden rises and falls in the price.

Categories: Bitcoin, BTC, Coins, Hodl, Price, Trading

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