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The Good

Supply-side dynamics remain strongly in BTC’s favor, with heavy exchange outflows and an increasing illiquid supply shock ratio underscoring a recent accumulation trend. Derivatives markets seem to be flashing bullish as well, as evidenced by the recent uptick in open futures interest amidst this late summer rally. On the technical front, BTC is trading above its well-tracked 200-day SMA further demonstrating the upside momentum backing the world’s largest crypto. 

The Bad 

There seems to be a growing divergence between BTC’s spot price and on-chain activity as illustrated by a dwindling transaction count and a rising NVTS. In the words of one twitter analyst, BTC needs a party (i.e., high demand for block space) to rally. Right now, that party is nowhere to be seen. 

The Ugly

Per Coin Telegraph, the $50,000 mark is currently serving as a key area of resistance for market participants, just on a psychological level. Analyst Lennard Neo says he believes this alone is enough to stop BTC’s rally dead in its tracks. 

On-Chain: 

>Stablecoin Supply Ratio (SSR), 7-day SMA:8.06

SSR measures the supply of BTC relative to the supply of all stablecoins, denominated in BTC. Assessing the relationship between the size of the stablecoin market and BTC allows the investor to determine whether buying power remains ample, or conversely, has been exhausted.

Bullish. At its current mark of 8.06, SSR’s 7-day SMA continues to loiter well below January’s YTD highs, suggesting ample buying power (in terms of USD-pegged stablecoins) remains on the sidelines, some of which already seems to be making it way into the markets as evidenced by SSR’s slight uptick from June’s All-time lows. 

>Adjusted Spent Output Ratio (aSOPR), 7-day SMA:1.042

The aSOPR metric examines levels of profitability/loss experienced by coins moved on-chain over a 24-hour interval. aSOPR calculates an aggregate level of daily spent outputs or the price at which a coin is sold divided by its respective cost basis. A ratio above 1 indicates that coins–in the aggregate–are being sold for profit, vice versa for ratios below 1

Bullish: aSOPR’s weekly average continues to consolidate above 1, clocking in at 1.037 for the week ending 8/29. Traders have continued to realize profits through this late summer rally, hinting that the market is willing and able to absorb sell-side pressure. On the intraday charts, aSOPR has made a habit of resetting to 1 before quickly bouncing higher, suggesting investors are no longer willing to sell at a loss. 

>Number of Transactions, 7-day SMA:245,993

Weekly moving average tracking the daily number of transactions successfully processed by the Bitcoin ledger, serving as a proxy for block-space demand and the underlying strength of the network. 

Bearish: The Bitcoin Network’s daily transaction count remains nearly 40% off January’s YTD highs, suggesting demand for block space remains lows. While this growing divergence between price and on-chain activity sings a bearish tune in the short term, it is not without precedent, with many drawing similarities to the pre-bull accumulation phase of 2020. 

>Coin Days Destroyed (CDD), 7-day SMA: 9.92 million CDD

CDD is used to gauge the dynamics and length of market cycles by placing heavy attention on the trading actions of investors that hold BTC for the long term.

The spending behavior of long-term holders is reflected in the size of CDD; consequently, traders can use this metric to track potential inflection points in market cycles. 

Neutral: BTC’s August rally has coincided with a considerable spike in CDD (nearly 300%) on the weekly charts, suggesting that some LTH’s have begun to take profits (as was expected). However, the metric is still far off levels seen in the runup to May’s market capitulation, signaling that despite a number profit taking events, large portions of the market remain hell-bent on HODLing.  

Technical: 

>200-day SMA:$46,034

Equally weighted average tracking daily pricing data from the last 200 trading days. Often represents a key area of support/resistance and provides a solid assessment of the underlying price trend by largely ignoring volatile day to day price swings.

Bullish: As of 8/29 BTC was sitting comfortably above its 200-day SMA, in a move that confirms the market’s current bullish sentiment. 

>RSI, 14-day: 58.68

Momentum indicator measuring both the speed and rate of change of recent price movements. Helpful in determining overbought/oversold market conditions.

Neutral: As of 8/29 BTC’s 14-day RSI was sitting pretty below its keys threshold of 70, hinting that the market is neither overbought nor oversold, hence the neutral rating. 

Fundamental: 

>Open Interest, Futures, 7-day SMA:$16.7 billion

Calculates the total amount of funds ($USD) currently locked in BTC futures contracts (across all major exchanges) that have neither been exercised nor expired. Provides insight into the actions of institutional traders, while also evaluating the general level of strength/weakness that underlies price fluctuations of BTC. 

Bullish: Bitcoin’s August rally has coincided with a fairly significant increase in open futures interest (nearly $3billion). The metric is quickly approaching levels unseen since May, suggesting bullish conviction remains strong in the derivatives market. 

>Net Exchange Flows, 7-day SMA:-3,853.52 BTC

Weekly moving average tracking the difference between # of BTC flowing into and out of exchanges. The numbers projected by the metric are counterintuitive; positive net inflows are normally taken as bearish signatures, and vice versa for outflows.

Bullish: Exchanges experienced an average net flow of -3,853.52 BTC for the week ending suggesting that the market’s conviction to HODL remains hefty. 

>NVT signal (NVTS) 7-day SMA: 42.3

NVT measures BTC’s market cap relative to the 90-day SMA of daily transaction volume on the Bitcoin network. It provides insight into overbought/oversold market conditions, serving as a leading indicator of market peaks/troughs. 

Bearish: The growing divergence between BTC’s spot price and on-chain activity has negatively impacted NVTS, which is currently approaching levels unseen since late April 2021. A rising NVTS hints that BTC’s underlying fundamentals (transaction volume) are failing to keep up with positive momentum in spot markets.

>Market Value/Realized Value, MVRV Ratio, 7-day SMA:2.37

Takes the current market cap of BTC and divides it by the realized capitalization.

Since realized cap presents a cumulative cost basis for the market and removes the influence of dormant coins, it provides a noteworthy assessment of Bitcoin’s long-term fair valuation.

Bullish: What this ratio is saying is that, hypothetically, if all holders were to sell their BTC positions right now, they would receive–on average–2.37x their initial investment. Given the ratio is still well-off March’s YTD highs, MVRV would seem to hint that BTC has not yet heavily outstripped its “fair value”, suggesting this late summer rally could have further legs. 

>Mean Hash Rate, 7-day SMA:113.1 EH/sec

Hash rate: an estimation of the total numbers of hashes produced each second by miners on the Bitcoin network, serving as a key proxy of the total computational resources underpinning the world’s largest crypto.

Bullish sentiment can be derived from the fact that the hash rate has rebounded nearly 56% from July’s YTD lows, hinting that miners involved in the “great migration” are starting to come back online. 

>Futures Perpetual Funding Rate, 7-day SMA: 0.008%

This metric is designed to track the average funding rate–weighted by the size of open interest on each tracked exchange–required to hold a perpetual futures contract tied to BTC. The prevailing rate–whether positive or negative–incentivizes traders to buy/sell perpetual contracts to converge the perpetual futures price with the spot price.To maintain a hypothetical $1,000 perpetual BTC futures position, longs were paying shorts about $8.00 every few hours over the past week, on average. 

Bullish: This positive funding rate indicates that traders are willing to pay to be long BTC, demonstrating their bullish sentiment.