I want to look at Bitcoin topic once again.
- What's next with the BTC price?
- What factors can affect it?
- What should we pay attention to?
Since I’ve written about the China’s ban on cryptocurrencies and the acquisition of cryptos (mining), I won’t go into detail about that, as well as the large volumes of energy resources that are spent on mining. However, I only want to note here that it is not the first time when China bans BTC.
Having said that I want to continue to look at BTC "technically".
Lately I've been reading a lot about the crypto market in general and BTC reviews in particular. Both free and paid resources. So, I want to summarize the most frequently viewed things in these reviews. Please note that none of my findings mentioned below are sorted in any particular order, and there is no one the most significant factor that tops above the rest.
Mempool report.
Simply put, a mempool (short of “memory pool”) is a "waiting area" for pending transactions. Mempool shows how many transactions are awaiting approval. There is a clear correlation in these reports: the higher the "demand" for transactions, the more crammed the mempool, the higher the price. For example, if you look at this year’s table, you can see that the mempool quickly "filled up" from January and remained "full" until May.
In January, the price of BTC consolidated after the rise at the end of last year, and then continued its winning streak until the fall in May when the mempool emptied. Simply because the huge demand disappeared.
In my opinion, it is not the most important indicator, but it is worth to pay attention to, though. Especially if you want to send someone a BTC: if the mempool is full, then this transaction will not clear as fast as usual.
The “whales”.
So-called “whales” are private individuals or companies that own a large number of BTC. In total, "whales" account for about 15% of all BTCs. The number of wallets that hold 1000 and more BTCs is definitely on of the most important indicators to pay attention to. In the following graph: the black line – BTC price, the orange one – the number of large wallets.
I think this is a relatively good indicator. It shows the mood of the big players. Especially when you see how they behaved in the previous price increase (2017) and what they are doing now. Once the price began to rise sharply, “whales” slowly sold their Bitcoins, but when the price started to stabilize, they again started to buy additional BTCs.
As you can see, in this growth cycle, whales started selling their BTC rather quickly when the price reached the 60,000 mark. Thus, putting a lot of pressure on the price. Because a large number of BTCs were sold on the market. Now that the price has started to stabilize, the sell pressure of large market participants has also stabilized.
What else does this indicator show?
The big participants of crypto market are continuing to accumulate the BTCs in the long run. With all the rises and big falls of price, the number of BTC holders is continuing to increase. It is obvious that these large wallets’ holders are playing long-term game and that many have chosen BTC as their "store of value" and no price drop can really shake them.
Number of active addresses.
The number of unique addresses that were active in the network either as a sender or receiver. Only addresses that were active in successful transactions are counted.
Here again, the correlation is clear. The more active addresses that perform transactions, the higher the price.
Stablecoins.
The coins that are pegged to the dollar’s price. As simple as that: one stablecoin = one dollar.
In order not to have to change the cryptocurrency to fiat currency, it can be changed to digital dollars instead, without need of bank’s account or transaction fees. It's fast and much more convenient. Although from the beginning everyone looked at these stablecoins with great skepticism, now they have won their place in the world of crypto. And it's happening very fast. At the moment, stablecoins are worth around 60 billion in crypto world.
This means that not only are Bitcoin “whales” are loyal to the cryptocurrency and continue to hold their funds in the BTC, but speculators also choose not to leave the crypt environment.
This is a very important factor. The more stablecoins out there, the more willingness to shop on the crypto market. Because those who switch to cryptocurrency dollars instead of real ones are interested in operating in cryptocurrencies in the long run.
Net transfer volume from / to exchange - all exchanges.
In short: BTC volumes entering or leaving stock exchanges.
In other words, if the BTC flows away from the wallets to the "cold wallets", then it usually indicates that the participants are willing to keep the BTC with them instead of the exchange and are willing to do so in the longer term.
Thus, reducing the number of BTCs available on exchanges. And if BTC returns to the stock exchanges more often or at larger volumes – it indicates a desire to make a transaction (sell) - because what other reason is there to send their BTC to the stock exchange?
And here again there is a clear correlation. Since March last year, BTC was accumulated in private accounts rather than stock exchanges. This clearly indicated market sentiment. When the price peaked in April and May of 2021, participants began to send their BTCs to stock exchanges rather quickly, reflecting in the price of BTC which sharply went down. So, this figure is quite important as well.
There are several more indicators that appear in various surveys, as well as lots of customized data and derivatives. Is it worth to chase every piece of this – I don't know. In my opinion, these few indicators I mentioned above are simple enough and allow to understand the market mood, the trend.
Next, if you have decided to make a deal, then you can dig deeper. In my opinion, this cycle has not yet peaked. I also continue to monitor the crypto market, especially BTC and ETH.
As for my results since I started to write this blog: + 107%.
Stay tuned!
Agris