Bitcoin (BTC) price gains in October have led to new on-chain signals being confirmed. On the positive side, all of these signals suggest that Bitcoin is in a good support area and that the price could rise.
1. Bitcoin’s equilibrium zone has been determined
The structure of price movement is moving from one large liquidity area to another. In those large liquidity areas, the price will move sideways and confirm the equilibrium area.
By observing the price distribution of BTC when it is on-chain (Bitcoin UTXO realized price distribution), it can be seen that the area between 25,000 USD and 30,000 USD is the area with the highest BTC transaction density.
Bitcoin UTXO achieves price distribution.
Technically, the $25,000-$30,000 price range is also the sideways range for nearly 7 months. This is also the price range where Tesla bought Bitcoin, and it is also the DCA average of Microstrategy. Generally speaking, anyone who faithfully follows the DCA strategy will break even in this price range. This is also the average cost of mining 1BTC.
It is worth noting that the equilibrium zone was formed when the BTC price rebounded from below $16,000. Therefore, such a long sideways range means that the market has accepted the value of Bitcoin in this price range. Bitcoin needs a "stimulus" and the price will quickly shift to a new, higher equilibrium.
2. There are early signs of cash flow recovery
The market realized value net position change indicator can reflect whether more funds are flowing in or out by comparing the price at the time of the last transaction on the chain.
In the figure below, the blue histogram area is the area marking positive cash flow, and conversely, the red histogram area is the area marking negative cash flow. Correspondingly, when more funds flow in (inflow), the BTC price will also remain high, and when more funds flow out (outflow), the BTC price will also fall.
The market has realized a net change in value position.
The above chart is calculated based on the strike prices of market-leading assets such as BTC and ETH. It is worth noting that as the market enters October, capital inflows have been confirmed since the end of July, when capital outflows caused BTC and ETH prices to fall.
It is important to note that it was not due to the false news event on October 16 that led to the rise of BTC, but rather that the inflow of funds began in the first week of October. Although the false news has been confirmed, BTC is still fluctuating above $28,000 as of now. Therefore, this may be an early sign that cash flow has resumed, although it is not strong enough.
3. Bitcoin price volatility is higher than the average cost
The next on-chain signal to watch out for is the Bitcoin long/short on-chain cost basis. This is an indicator of the cost basis of long-term and short-term investors. Investors can identify early signals to predict future price action when compared to market prices.
The red line is the cost basis of short-term investors, the blue line is the cost basis of long-term investors, and the orange line is the average realized price of the entire Bitcoin supply, which can be understood as the consensus price of the entire market, reflecting the true value of BTC (over time).
Bitcoin long/short on-chain cost basis.
Since the BTC price crash in August, the BTC price has fallen below the cost basis of short-term holders, but this has not caused them to continue selling BTC. In October this year, the Bitcoin price continued to fluctuate above $28,000, which means that Bitcoin has broken through all three of the above-mentioned important moving averages.
This suggests that short-term holders may be starting to take profits. It may not be much, but it gives them renewed hope. This could be an early sign of positivity in market sentiment.
4. The percentage of supply held by long-term holders hits a new record
October set a record for on-chain signaling, demonstrating the “diamond hands” spirit of Bitcoin holders. The percentage of supply held by long-term holders hit another record high of 76.2%, surpassing the previous all-time high set in 2015.
The percentage of supply held by long-term holders.
This can be explained as follows: BTC has never been so heavily and firmly held by holders as it is today. At the same time, the much-anticipated 2024 halving event is considered a new milestone for the rise of Bitcoin prices.
BTC tends to enter bottoming phases when compared to the price line (i.e. the rate at which the BTC supply held by long-term holders is increasing). Today, this ratio has risen to a new all-time high, which seems to indicate that a major bottom has been formed for BTC. And this signal indicates that the next uptrend (if it occurs) will allow the BTC price to set new highs even better than before.
5. The cumulative trend point shows signs of accumulation again
The Accumulation Trend Score is an interesting on-chain metric. Sometimes investors only care about the accumulation of Bitcoin and not the proportion of large/small entities behind the accumulation.
The Accumulation Trend Score is an on-chain indicator that reflects the size of entities accumulating Bitcoin. Specifically, when this indicator reaches 1 point (dark blue), it indicates that BTC is being strongly accumulated. Conversely, when this indicator drops to 0 (dark red), these entities are selling. The transaction size of the entity is represented by the number of BTC (in the Cohorts by BTC column).
Cumulative trend score.
The dark blue (strong accumulation) of entities with balances of 1 - 10 BTC was recorded during October compared to the chronological Bitcoin price from YTD 2023. The entities with larger balances (10-10,000 BTC) have changed from red to gradually brighter yellow, indicating a reduction in selling sentiment.
Overall, as we enter October, the deep red color of September shows signs of fading, and October shows a certain positivity, with physical sales no longer as strong as in the previous two months.
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【Disclaimer】The market is risky, so be cautious when investing. This article does not constitute investment advice, and users should consider whether any opinions, views or conclusions in this article are suitable for their specific circumstances. Investing based on this information is at your own risk.
