On-chain Weekly April 8th

  • Long-term Outlook - Sentiment: Bullish - Bitcoin continues to move from exchanges, which is generally a positive indicator of steady demand. Long-term investors continue to accumulate Bitcoin, suggesting greater price expectations later in the cycle from smart money holders.

  • Mid-term Outlook - Sentiment: Bullish - The current market structure, from the perspective of Net Unrealized P/L, continues to show potential for strong growth, hovering in the 0.5 range. Spent Output Profit Ratio (SOPR) has remained above the value of one (bullish) for longer than a week – something that has not occurred since November 2021.

  • Short-term Outlook - Sentiment: Neutral - Short-term rallies in price bolster Open Interest positions on exchanges, however, current demand from retail investors has stalled. Large entities are accumulating, but slow retail demand is creating choppiness in the market with the price of BTC continuing to trade sideways in the mid-to-upper $40,000s.

Long-term Outlook - Sentiment: Bullish

800,000 BTC move out of exchanges

Over the past two years, on-chain data shows that BTC is consistently flowing out of exchanges. While this fact does not immediately contribute to either a bullish or bearish sentiment, it can reveal important characteristics about the behavior and knowledge of the investors on the network.

The first question that comes to mind is, “where is the BTC going when it moves away from exchanges?” The simple answer is that the outflowing BTC is moving into self-custody wallets. Self-custody wallets are wallets that are not controlled or maintained by any CEX (centralized exchange). These types of wallets are wholly controlled by their owners and can be hardware wallets, browser-based wallet plugins, or app-based like the Numbrs Bitcoin wallet solution.

Over the last month, on-chain data shows almost 800,000 BTC flowing out of exchanges. These outflows can be linked to renewed demand for Bitcoin. The above metric has been moving sideways for well over six months, and large outflows have preceded price action in the past. For the long-term, the general theme remains bullish for Bitcoin with the recent outflows marking a potentially good sign on all time horizons.

Most “Bitcoiners” or BTC enthusiast investors see outflows from exchanges as a bullish indicator, positing that BTC moving away from exchanges means they are being taken out of liquid circulation thus restricting supply. This is not always the case, and it should be noted that BTC can be moved back onto exchanges just as easily as they are taken off, partially hollowing out this bullish theory. What is bullish, is that we can assume that as the BTC market matures that its users will become more and more sophisticated and knowledgeable on the topics of storage and the use of Bitcoin.

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Long-Term Holders Accumulate BTC

Over the past quarter, the price of BTC has been in a downward trend only to recently show signs of a recovery during the last week of March 2022. That downward trend was exacerbated by macro headwinds and regulatory uncertainty – all of which contributed to an extremely tricky market to forecast. Long-term holders (LTH) took profits and accumulated BTC over the last quarter but did so at relatively low levels. This class of investors, who typically represent the most experienced “smart money” investors in the BTC space, showed greater uncertainty during the recent market cycle.

Notice the behavior of LTH in past markets, such as the start of the bull run that began in October 2020. As the price climbed, LTH sold into strength, switching to accumulation mid-way through the cycle with greater pricing in mind for later in the year. Long-term holders continued to accumulate up to November 2021 just before the market’s downturn. LTH accumulate Bitcoin with the expectation of higher prices in the future. If their current behavior is in line with this notion, the recent acquisition of BTC by long-term holders is a bullish indicator.

Mid-term Outlook - Sentiment: Bullish

Net Unrealized Profit/Loss (NUPL) is the difference between Relative Unrealized Profit and Relative Unrealized Loss. This metric can be calculated by subtracting realized capitalisation from market capitalisation, and dividing the result by market capitalisation. The metric measures what percentage of holders would be in profit if all Bitcoin in circulation were sold today.

The NUPL is currently nearing the 0.5 range, which means 50% of the market is in unrealized profit. Comparing this value to previous market cycles, it becomes evident that 0.5 could be a reliable pre-bull market reading. In the past, we have seen two occasions where NUPL was at similar levels and was followed by a peak in price within the following three to six months. If the price of Bitcoin continues to send STH/LTH into profits (as they have in the fall of 2020 and the summer of 2021), a strong bull cycle can be expected. It should be noted that once the NUPL goes above the 0.70 mark the price of BTC has historically climbed to new all-time highs (ATH) soon afterward.

Do short-term holders' profits signal future growth?

The recent BTC market has been tricky, with few on-chain indicators providing definitive guidance as to the short and mid-term pricing outlook for the Bitcoin protocol. However, when there have been spikes in short-term holder profits greater than 10%, we can note three instances in the last two years where strong price growth followed.

Most recently, in October 2021, STH profits jumped by 15% as short-term investors held on to their BTC long enough to see the price climb to the most recent ATH of nearly $70,000. Prior to that time, the market had a similar structure in regards to STH profits at the beginning of August in 2021 and earlier that year. With the price of BTC moving upward in recent days, more and more short-term positions will move into profit positions. If investors show conviction and hold out for higher prices later in the cycle, the potential for strong growth becomes more probable, setting up a bullish mid-term outlook. However, if short-term holders decide to take profits, then this most recent rally could quickly become another “dead-cat bounce”, similar to earlier this month.

Short-term Outlook, Sentiment: Neutral with Caution

Large Entities Accumulate in March

An Accumulation Trend Score of closer to one (darker color) indicates that on aggregate, larger entities (or a big part of the network) are accumulating, and a value closer to zero (lighter colors) indicates they are distributing or not accumulating. This provides insight into the balance size of market participants, and their accumulation behavior over the last month.

  • A score closer to 1 reflects that, over the last month, big participants (or a big part of the network) have been accumulating coins.
  • A score closer to 0 reflects that, over the last month, big participants (or a big part of the network) haven’t been accumulating coins or that they have been selling them.
  • Exchanges and Miners are not included in this metric.

In recent weeks, large entities have been seen accumulating BTC, bolstering short-term pricing. Michael Saylor’s MicroStrategy added ~4,000 BTC to their 130,000 BTC treasury last week while UST, the Terra ecosystem stablecoin, added an additional $1.2bn to their expected $10bn BTC treasury.

Open Interest on the Rise

The last quarter of 2021 was marked by a notable decrease in Open Interest (outstanding derivative contracts) after the market deleveraged nearly $20bn in risky crypto-leveraged positions from mostly retail-based exchanges like Binance and Bybit. March 2022 marks the greatest increase in OI since that time with nearly $4bn added to OI over the last 30 days.

The metric above captures the total funds (USD Value) allocated in open futures contracts across Binance, FTX, CME, BitMex, Bybit, OKEx, etc. Over the past week, the overall contract value held in exchanges has been relatively high, reaching over $16bn in total.

As noted in the mid-term section, there has been a 10% increase in short-term holder profitability over the past week. This can trigger quick sell-offs as short-term investors move to recoup losses sustained over the most recent bear market. Conversely, if the most recent market rally is being fueled by investors with greater conviction, the Open Interest risk decreases as long as a healthy flow of spot demand continues to absorb any liquid supply that could trickle in from long-term holders.

More “Dry Powder” moving on Exchanges

Short-term spikes in STH profitability have preceded bullish cycles for the Bitcoin Network. Current STH/LTH profit dynamics show a similar market structure to past “pre-bull” markets. If STH decide to hold on to more of their BTC during this rally; short and mid-term price horizons could push prices into new ATH ranges. With over $25bn in stablecoin sitting on exchanges waiting to be spent, a recovery could potentially materialize quickly.


Bitcoin continues to trade sideways amidst slow retail demand and continued pressure from macro headwinds. Last week, a short rally pushed the price of BTC into the upper $40,000s, but quickly retreated back into lower ranges on news of the Fed potentially raising rates by 50 basis points in May.

Even while the short-term perspective is quite unclear, the long-term fundamentals of the BTC protocol remain strong with consistent demand evidenced by a two-year trend of BTC outflows from exchanges into self-custody wallets. In addition to the constant demand, it is becoming obvious that users who store their Bitcoin in self-custody or cold storage are more experienced, more confident investors.

Nothing in this article constitutes professional and/or financial advice. The content is provided exclusively for informational and/or educational purposes. Nothing is to be construed as an offer or a recommendation to buy or sell any type of asset. Seek independent professional advice in regards to financial, tax, legal and other matters.

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