Will Clemente Looks Into Past Week In Bitcoin, Draws Two Short-term Cases
On-chain analyst Will Clemente looked into the past week in Bitcoin, and laid out two possible scenarios for the leading digital asset by market cap for the short-term.
Short term bear case
This recent covid variant news is not ideal for the markets; both crypto and legacy. Narratives aside, for Bitcoin the short-term bearish case lies in derivatives data. We are currently seeing open interest as a percentage of market cap unphased by this recent drawdown. In addition to this funding seems relatively unphased as well as the limited amount of long liquidations that we’ve seen. Would not be surprised to see some kind of final liquidation-driven wick down.
Short term bull case
First of all, we are very close to retesting the bull market support band of which we’ve talked about over the last few weeks here in the newsletter as well as on Twitter. This is the short-term holder cost basis, realized price, or volume-weighted average price (VWAP) for technical analysts. Currently sits at $53K. As mentioned above, wouldn’t be surprised to see a liquidation-driven wick, but do not want to start seeing daily closes* (more than one) below the band.
Entity-adjusted SOPR (spent output profit ratio) has had a bounce off the 1 threshold which means market participants are not willing to start selling their BTC at a loss, at least for now. We’ve been talking about a potential retest for the last month or so; now just want to see it hold. In bull markets, you want to buy the retests of 1 as support, in bear markets you want to sell the underside retests of 1 as resistance. 1 = neutral state of profit in the market; when the profit and losses being realized balance each other out.
From an intermediate-term standpoint, there’s a clear bullish divergence between illiquid supply shock ratio and price right now. Illiquid supply shock compares liquid entities (sell 50% of the BTC they take in) and highly liquid entities (sell 75% of the coins they take in) to illiquid entities (hold 75% of the coins they take in). This means supply is moving to entities with little history of selling. If this does start to decline I will become bearish, but for now, it is continuing a steady incline. This is not the first time we’ve seen such a divergence; we’ve had one as recent as the end of September.
Broader on-chain metrics that follow the “macro” cyclical behavior are all still far from overheated. To see any of those metrics, see this thread I put out with 22 of them to watch out for.
We've been tracking the macro price reversal since summer using on-chain. Now what clues can it provide us in our effort to identify the macro price peak over the coming months?
First we'll start with behavioral trends and then everyone's favorite, price targets.
If we are indeed in a bull market, the asymmetry is very skewed to the upside right now. Invalidation would be starting to close below $53K for several days, seeing SOPR breaking below and failing to retake 1 from the underside, as well as starting to see illiquid supply shock rolling over.
