Will Clemente: On-chain Metrics Flashing Bullish For Bitcoin, ATH Coming
A prominent on-chain analyst Will Clemente looked into the week in Bitcoin, as the leading crypto asset nears all-time high levels.
Bitcoin has had yet another strong week, testing just shy of $60K overnight. Let’s dive into some trends that are probably worth paying attention to.
First of all, Bitcoin sits now sits at the very edge of realized price distribution. This shows the amount of BTC last moved at each denomiated price level. There is now just 0.68% of Bitcoin’s supply last moved above us. This means there is very little resistance or overhead supply to the upside.
Nothing has changed with SOPR, still seeing continued upside after this recent textbook bounce that confirmed we are in a bullish trend.
Aside from Huobi, Bitcoin’s futures curve is in contango. This means that the curve slopes positively and contracts further out on the term structure are higher than the previous. But why is this important?
Futures being in contango creates an opportunity for active mangers to take a non-directional position in the Bitcoin market to arbitrage the spread between spot and futures. This is done by buying spot and selling futures, also called cash & carry. The annualized 3M futures basis is now at 14.18%, still far from earlier this year, but something to definitely keep an eye on.
If the vehicle gets significant volume/adoption, a futures ETF would likely bid the CME futures curve rather aggressively. This would open up the opportunity to US based funds to capture the futures basis. Earlier this year CME’s basis lagged behind overseas exchanges such as Deribit, FTX, Huobi, Binance, OkeX, Bybit, etc. because CME doesn’t have access to massive leverage and is cash-settled. This meant due to regulatory restrictions US funds were widely left out of the cash/carry tade although many took part in the Grayscale arbitrage.
Another interesting trend in the derivatives market is the decrease of crypto margined futures. This means less convexity to the downside and shorts are more likely to be squeezed as they no longer have an inadvertent hedge via their collateral. I suspect that this will reverse once breaking all time highs but we’ll keep an eye on it.
Over the last month we’ve seen a large increase in overall volume from $10M+ transactions, reaching as high as 84% of overall volume. This is probably partially due to exchange batching but primarily large OTC transactions. (whales are active in the market)
This is also reflected in our entity data. We’ve been talking about whales since July. Although they started to trim their holdings a bit over the last month, we’ve actually seen the 100-1K cohort offset their selling by over 1,000 BTC in that time period. Overall, conclusion is that large buyers have indeed been active in the market.
We’re starting to see transactional activity pick up again, back up to levels not seen since May. To me this reflects that we really haven’t seen full blown speculation enter back into the market and paired with large TXs dominating volume suggests retail still hasn’t entered the market. (also shown by google search trends and Coinbase app downloads)
Macro still highly bullish. 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)
Lastly, we take a peek at miner related data. Slight drawdown in hash this week, although not surprising to see with it having been up only since July. Despite this increase in hash and 6 consecutive difficulty adjustments, Revenue/Hash in USD terms is higher than where it was after the miner exodus. (thanks to higher Bitcoin prices) Also got a nice little uptick in miner’s balances this week.
