The Coinomo team is pleased to present our followers with another monthly deep-dive article into the crypto/DeFi industry. This month, we will talk about the uncertainty facing the crypto market as well as key indicators that could indicate market direction. We hope that this article will help our readers understand even more about the industry at large!
Q1 2022 in Review
The crypto market has remained on the bear side since the crypto crash of Jan 2022. Despite recent rises in BTC price, reaching a local high of $47,649 on Mar 28th, overall volatility and BTC network activity remains low throughout February and March. However, conventional market wisdom tells us that the signs of an oncoming bull market are written in the preceding bear. There is a strong indication that the overall crypto market is reaching the later phases of its ongoing bear.
The Coinomo team and other prominent analysts in the crypto industry believe that the crypto market is entering an inflection point in the coming quarter. We will delve into the metrics that support the possibility of an oncoming bull. Furthermore, we discuss how supply dynamics in crypto are segmented geographically between long-term holders and short-term speculators and how such metrics have historically served as a signal for the end of a bear run.
Supply Dynamics & Market Activity
The supply dynamics behind BTC price movements can be segmented geographically and into long-term holders and short-term speculators. Trends in BTC trading reveal that most buy-side pressure occurs during US and EU trading hours, whereas sell-side pressure originates during Asia trading hours. This behavior extends during bear and bull runs. Historically, western crypto participants accumulate during a bear cycle, whereas Asia sells most of their crypto assets. The Asian market adopts a more conservative stance during market bull runs, participating later and with less volume than the west. Current data shows an easing of sell-pressure from Asia and a growing buy-pressure from NA/EU, potentially transitioning into a bull market.
Volume and on-chain activity metrics paint a similar picture. A bull run coincides with a significant increase in new on-chain entities and transaction volume, followed by a sharp dive during the following bear, then a gradual recovery into another bull run. Current data of entities and volume indicate we are in the midst of recovery into an incoming bull.
A Stronger Backbone – Long Term Hodlers
Glassnode studios have introduced a new category of metrics primarily tracking the activity of long-term holders. By tracking BTC unspent transaction outputs (UTXOs) – in other words, coins which are saved for longer than three months – Glassnode analysts can sift through on-chain wallet addresses to segment market participants according to their investment profile. The argument is that short-term crypto speculators who hold relatively smaller amounts of assets, lack market knowledge, and trade on impulse do not accurately picture the larger market dynamics of crypto prices. In fact, by tracking solely the activity of long-term crypto holders and whales that hold a significant portion of coins in circulation, analysts have discovered that they consistently predict the timing of bear and bull cycles, earning an above-average return on investment.
Long-term holders (LTH) addresses accumulate during the recovery period post bear and profit-take during bull runs. Interestingly, even during the recent bear in the crypto market throughout Q12022, the supply of coins held in LTH addresses remains stable and constant, indicating significant investor confidence in an upcoming price rally into a bull market. Overall, the total supply held by LTH offers the most concise insight into market sentiment.
As of this writing, crypto prices have again dropped due to fears of inflation and the US releasing a problematic consumer price index. The Coinomo analyst team monitors the market indicators closely and remains confident that a recovery may be probable in Q2 2022.
In the meantime, diversify your portfolio and learn more about how Coinomo can help you invest; feel free to join our discord channel for all the latest updates as well as download the Coinomo app to check out our yield-earning DeFi products!