Market Intelligence 8

Market Intelligence 8
  • Weekend sell-off driven by liquidations in the futures market
  • Long-term holders continue holding as Short-term holders realized large losses
  • Whales bought the dip


Weekly Price Action

  • Prices ranged around $57k until the weekend
  • Prices dropped to $42k or 28% in a few hours due to a leverage flush
  • Prices recovered back to $47k quickly and has gradually climbed back above $50k
Bitcoin Weekly Price Action

Technical Analysis

The price chart suggest that price has been trading in a downward channel since reaching an all-time high on the 10th of November. Prices traded outside the channel during the December 4th correction at $42k, suggesting a strong bottom level.

Moving forward, price is expected to trade sideways and potentially resume its macro trend upwards if it can break out of the channel.

Bitcoin Short-Term Chart

Liquidation Cascade drops prices to new multi-month lows

Before prices experienced a 28% correction, 'Open Interest' in the Bitcoin Futures market had been hovering around all-time high levels. This is usually indicative of excessive leverage in the market.

At the same time, traditional markets were pulling back due to risks presented by the Omicron Covid variant and concerns about the Federal Reserve accelerating its tapering efforts.

These factors pushed prices down to $53k levels a key support level. Spot-selling ensued during low liquidity hours which broke support levels and ultimately triggered the cascade of long liquidations.

On-Chain Fundamentals

Bitcoin Futures Open Interest

We can confirm that the 28% correction was caused by a large liquidation of derivatives contracts by viewing the 'Bitcoin Futures Open Interest'. It illustrates the significant decline in futures contracts on the 4th of December.

Approximately $5.4 billion worth or 24.5% of futures contracts were liquidated.

Bitcoin Realized Loss

We can view the 'Bitcoin Realized Loss' metric to understand the severity of the losses incurred by investors. Realized losses on December 4th totaled $3bn, the highest mark since the correction in May and the bear market in June.

Such signficant losses can impact the macro market direction of Bitcoin. It is therefore important to evaluate which type of investors incurred these losses to understand how price will develop moving forward.

Bitcoin Realized Loss

Long-term Holders keep holding

HODL Waves

The 'HODL' Waves metric illustrates how the total supply of all Bitcoins is divided amongst various age bands. These age bands range from coins that have been held for 24hrs to coins held for more than 10 years.

We can classify the following age bands as follows:

Young Supply: 24hrs - 3 months
Old Supply: 3 months - 10 years

The metric can be interpreted as such:

  • Rising supply of young Bitcoins signals that LTHs are spending
  • Declining supply of young coins signals that LTHs are holding

The graph below has been filtered to only show the supply of young coins. We can notice that the young supply of coins has increased by 2.63% in the past month. This tells us that LTHs have spent their coins, as spent old coins become young coins and increase the supply of young coins.

Having said that, the supply of young coins has barely increased despite the large liquidation event. In fact, over 97% of the older supply has remained dormant. This is significant as it tell us that LTHs have continued to hold onto their Bitcoins, despite prices reaching all-time highs.

The majority of the losses incurred by the leverage flush came at the hands of short-term holders, as the supply of young coins has barely increased.

Bitcoin HODL Waves

Entity-Adjusted Dormancy (14d Moving Average)

Viewing the changes in coin dormancy can confirm our observations above. The metric measures the average age of all coins spent per day. The higher the metric, the older the average age of coins spent in a day and vice versa.

We can observe a continued downtrend in the metric since Bitcoin reached an all-time high and the December 4th price correction. An increasing amount of younger coins have been exchanged coins in the past month, confirming that LTHs are continuing to hold.

This demonstrates high conviction in the market, despite extreme volatility and losses.

Bitcoin Average Coin Dormancy

Short-Term Holders incurred heavy losses

Short Term Holder SOPR

Now that we know that STHs are primarily driving price action in recent week, we can view the STH SOPR metric to quanitfy their losses in detail. STH SOPR shows the profitability of coins spent by STHs. If the metric is above 1, than STHs are net in profit and vice versa if the metric is under 1.

The recent leverage flush generated the lowest STH SOPR since July, confirming the large losses short-term traders incurred last weekend, as well as the continued holding behaviour from mature long-term holders.

Interesingly, low SOPR have usually signalled bottoms whereas high SOPRs have signaled tops. If the pattern holds true, prices have room above to climb back up as the SOPR is again at a multi-month low.

On-Chain summary:

  • Last week's sell-off was driven by liquidations in the futures market
  • Long-term holders held their coins
  • Short-term holders who bought near all-time highs realized heavy losses

During periods of high leverage, price volatility followed by a severe correction are neccesary for the market to return to a healthy equilibrium.

Whale Activity

The metric below describes the total balance of addresses holding between 100 - 10k Bitcoins. Highlighted in white below is an uptick in whale balance during the leverage flush last weekend. This is constructive as it suggests that wealthy investors are seeing the recent correction as an opportunity to buy Bitcoin for a cheaper price.

Combined balance of BTC addresses holding 100 BTC - 10'000 BTC


  • Prices are set to consolidate in a sideway channel according to technical analysis, and can move higher if prices breakout of the channel

  • Long-term holders have held their coins and remain unfazed from the price correction

  • Short-term holders incurred heavy lossess as they bought the recent tops and got flushed with the correction

  • Whales have timed the correction perfectly as they purchased a signficant amount of Bitcoin after the leverage flush

On-chain macro structure remains intact as the majority of the supply of Bitcoin remains off-exchange, and is controlled by long-term holders. Short-term holders continue to drive the market and to exchange coins between themselves. The long-term view remains bullish, with the most recent correction being a good buying opportunity according to Bitcoin whales.