Bitcoin On-Chain Analysis Series: Bitcoin Continues To Build Up A Big Base Of Capital And Retail Re-accumulation Continues
As we discussed in our previous on-chain analysis series, Bitcoin price continues to grow as large re-accumulation is coming from retail, and it continues to build up a big base of capital between $32K - $40K range. Over 15.91% of Bitcoin's money has moved to this $32K - $40K range, which is quite a massive volume and is all coming from the smaller retail investors.
The 'W' shaped recovery continues as 36,000 new users are joining the network every day, and the net entity growth is increasing. These new users are smaller entities (retail), and we didn't see a growth pattern for larger entities (whales). We have seen this net growth in smaller entities for over six weeks now, with a large accumulation coming from them.
We also saw a massive -28% difficulty adjustment this Friday. The current difficulty adjustment is the lowest it has been since late 2019, and the block confirmation times are back under ~10 minutes. As part of the China miner migration, there is a lot of build-up sell pressure on miners, and they have been selling over the last month.
Let's dig a little deeper into the on-chain analysis for Bitcoin and see what clues we can gather by understanding the market's behavior.
UTXO Realized Price Distribution (URPD)
URPD shows at which prices the current set of Bitcoin UTXOs were created. Think of UTXOs as locked-up bitcoins, as these are the unspent bitcoins associated with an address. Each bar in the URPD chart shows the volume of existing bitcoins moved within a particular price bucket.
We have now established a third zone of on-chain volume between the $32K - $40K range, and over 15.91% of Bitcoin's total money supply has now moved in this range. This large capital inflow will provide strong support for Bitcoin as it's showing an upward trend in the price action.
Mean Hash Rate And Block Interval
The Bitcoin network's hash rate has dropped to the lowest levels it has been since late 2019 due to the recent China crackdown on miners. The network continued to function, but due to low hash rate and large difficulty levels, the block confirmation times went from under 10 minutes to over 23 minutes.
An interesting event happened on the Bitcoin network recently when block number 689301 took two hours to mine, as the nonce was very difficult for the miners to calculate due to a large difficulty level. However, this hash rate reduction didn't seem to impact the price of Bitcoin as it's showing an upward trajectory due to large accumulations from retail, despite the sell-pressure on miners.
The mean block interval did reach incomparably high historical levels, but now that the network has gone through a massive -28% difficulty adjustment this Friday, the block intervals are back to under 10 minutes on average.
Due to an increase in the average block intervals, the Bitcoin issuance rate dropped, meaning fewer Bitcoins are being issued to miners than they previously had been. The regular Bitcoin issuance to miners was 900 BTC on average per day, but since the hash rate dropped to record lows, the Bitcoin issuance dropped to an average of 362 BTC per day.
Created by David Puell, The Puell Multiple is calculated by dividing the daily issuance value of bitcoins (in USD) by the 365-day moving average of daily issuance value. The Puell Multiple dipped into the 'buy' zone because of the low Bitcoin issuance on the network.
This buy zone has served as an excellent time to accumulate Bitcoin. This buy zone was created previously in the 2012 bear market low, the 2015 bear market, the 2018 bear market, and the March 2020 (covid) crash.
Entities Net Growth
The on-chain data shows that smaller entities have been buying heavily while larger entities have been selling their holdings. Young whales have done most selling over the last month compared to old whales, which is prevalent in the mid-cycle of any bear market.
The vast majority of this big 'W' shaped recovery in new users coming on-chain is retail. The retail is buying, and whales are selling, a fascinating phenomenon indeed. There are assumptions that most of this smaller retail is coming from Latin America due to the political acceptance of Bitcoin, but we are still unsure whether that's the case.
To give a perspective on who is buying and who is selling, here is the breakdown of different cohorts:
Retail or Shrimp (0.001-1 BTC): + 4,396 BTC
Crab (1-10 BTC): +14,942 BTC
Octopus/Fish (10-100) BTC: +15,705 BTC
Dolphins/Sharks (100-1,000 BTC): -17,374 BTC
Whales/Humpbacks (1,000-10,000 BTC): -27,037 BTC
As always, this has been an exciting week for Bitcoin as larger re-accumulations are happening from retail, and there is a growing number of newer users coming onto the network. Bitcoin's network adjusted its difficulty levels this Friday, and the issuance and block intervals are back on track.
Do you think Bitcoin is ready to break into the $40K range?
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