Will Clemente Looked Into The Week In Bitcoin, Long-Term Outlook Is Bullish

A top on-chain analyst Will Clemente looked into the past week in Bitcoin from on-chain perspective. While the short term outlook is hard to predict, the largest crypto asset by market cap remains bullish on long-term.

Bitcoin is consolidating in a tight range between $60K and $64K. On the daily chart we’ve entered a volatility squeeze shown via the Wick HTF indicator. Hate to be that guy but, “it’s time to pay attention soon” and “volatility incoming” are the only strong opinions I have about the immediate term price action here. One thing to note though, during the last 3 squeezes we’ve had (shown in chart below) the market has first faked out to grab liquidity from breakout traders and then swiftly gone in the opposite direction. We’re currently sitting smack dab between the upper and lower bands, but that’s something to keep in mind as this plays out.

On Wednesday, after the Fed announced they would be slightly tapering during the FOMC meeting, we got a price correction along with a nice little reset of funding rates. We’ve seen funding recover a bit, but nothing outlandish. As we’ve talked about in the past, the real actionable signals from funding IMO come when there is a dislocation between price action and funding rates. At the time of writing we don’t have that. However, keep in mind we’ve haven’t seen aggregated negative funding in 30 days. This isn’t actionable in itself, but more of a precautionary fact to keep in mind, as at some point we will come back and reset financing.

Taking a peek at orderbooks, we see a confluence of bids across several major exchanges right around $60K. But, we’ve talked before about how these orders can be spoofs looking to generate liquidity above/below bid/ask walls.

Traders seem to be noticing these bids along with $60K holding as a strong bottom of this local range as well. I say this because a lot of long liquidations are set just below $60K, shown by the chart below. I know I probably sound like I’m saying that it “could go down or up” in the short term, so to clarify: $60K is a strong level until proven otherwise, if broken with volume would expect a liquidation cascade to trigger. Between $60K and $64K we’re still just ranging, but shown by the volatility squeeze in our first chart, I do think a move is coming soon. This range seems to be more about lack of liquidity than indecision & we talked about how with the last 3 volatility squeezes have faked out to grab liquidity before the real move.

Ok we talked about the short term for the people who care, now let’s zoom out to our bread and butter, the broader picture.

Weekly and bi-weekly SOPR showing that overall the market is still maintaining a state of profit and there’s no reason to be macro bearish until we would theoretically break below 1.

Short term holder profit/loss ratio, created recently by David Puell, is another way to guage the state of profit the market is trading in. Very similar to SOPR, except this compres the amount of short term holder supply in profit to short term holder supply in loss; rather than comparing the profit to loss that coins realized on each given day.

Just like SOPR, macro bullish until a theoretical failed underside retest of 1.

My illiquid supply shock ratio continues to climb, reaching an aggresive rate of ascent. The ratio is now at 2021 all time highs and the highest it has been since 2017. This shows that supply is getting locked up by entities who hold at least 75% of the BTC that they take in historically.

After reaching all time highs a few weeks ago, long term holder supply shock continues to roll over. This means that long term holders now feel comfortable distributing their coins to new market entrants, which is natural bull market behavior. Here’s an excerpt from the newsletter 3 weeks ago: “Long term holder supply shock has soared to unquestionable new all time highs. Remember: At some point we will start to see LTHs begin distributing, which is normal. Long term holders (and whales) buy weakness and sell strength. (see 2017 & 2020)”

The spending from older coins is also evident by our spent volume age bands, showing the amount of spent volume coming from each denominated time cohort at the top of the chart. Seeing the warmer colors (>1M old coins) increase means older coins are being spent.

Entity adjusted ASOL (with a 2 week moving average) also reflects this. This metric shows the average age of coins being spent on any given day, but doesn’t take into account volume. Confluence between this, SVAB, SOAB, CDD, and Dormancy; all showing old coins are starting to be spent

Last, we take a look at on-chain cost basis, created by my good friend Dylan LeClair. This looks at the realized price (or cost-basis) of short term holders and long term holders. When short-term holder’s cost basis is below LTH’s, it has historically been a great time to accumulate BTC. This is representative of short term holder capitulating and leaving during the bear market. When STH cost basis overextends LTH cost basis, it is time to be cautious because of exuburance in the market. Currently sitting lukewarm.

For more on the broader picture, check out this thread I posted last week. I went in depth, looking at over 20 different metrics/on-chain behaviors that I’ll be watching closely throughout the next few months.

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.

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— Will (@WClementeIII) October 27, 2021

Conclusion:

• Immediate-term not clear but we know what to watch for as things unravel
• Long-term bullish

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