The chip structure determines the lower limit of BTC price corrections.
Every event that drives changes in market sentiment is accompanied by a sudden surge in on-chain turnover. After filtering data, the daily on-chain real turnover is typically around 100,000 BTC (7-day average), with more on weekdays and less on weekends; if it exceeds 150,000 BTC, it is considered 'abnormal' data.
For example, the extreme panic and anxiety in the market caused by the collapse of Luna in May 2022, the FTX collapse in November 2022, and the failures of banks like Silicon Valley Bank and Signature Bank from March to April 2023 all led to extreme panic and anxiety in the market, with on-chain turnover peaks exceeding 300,000 BTC (as shown in Figure 1).
(Figure 1)
From this perspective, we can see similar conclusions through CBD data (as shown in Figure 4).
We can see that in November, following Trump's victory in the presidential election, market sentiment peaked, with daily settlement volume reaching 200,000. This level of activity has only been matched in March of this year, and the high turnover also indicates a significant influx of capital in the short term. However, after December 17, sentiment began to cool significantly, and by the 25th, the daily settlement volume was around 120,000. Historically, after experiencing a peak, a decline in activity also indicates that the market is entering a period of calm, which is the time when adjustments are most likely to occur.
By tracking UTXO, we can categorize on-chain turnover by different implementation prices, resulting in a very intuitive distribution of chip structure data, known as URPD (as shown in Figure 2).
(Figure 2)
From the current data, the on-chain structure is gradually forming a chip accumulation zone within the range of $92,000 to $100,000, with a significant volume of 600,000 BTC at $97,000, decreasing towards both sides from this peak.
The emergence of a massive trading volume indicates two points:
1. This is likely not the absolute top price of the bull market cycle.
2. This price range has seen intense bullish-bearish competition, with a large amount of turnover forming a chip accumulation.
Where there are sellers, there are buyers, indicating that some believe the price will drop further and want to hedge, while others see value at this price and want to bottom-fish. It is precisely due to the large amount of bottom-fishing behavior that a strong support effect has developed in the $92,000 to $100,000 range. Thus, we say that the chip accumulation area has a 'damping effect' on the price, meaning that there will be resistance when the price tries to break through (not easy to penetrate), and when the price moves away, there will be attraction (pulling the price back).
If it is a cycle peak, there usually won't be much disagreement, only 'consensus'. When most participants arrive at a consistent understanding that the price is 'too expensive', selling more and buying less naturally leads to a 'peak'. Therefore, the emergence of disagreement is not necessarily a bad thing; it is a necessary process for the market to self-correct.
If we must provide an example, a similar chip structure appeared in July to August 2024 (as shown in Figure 3).
(Figure 3)
At that time, a chip accumulation zone was formed between $64,000 and $69,000, with a massive volume of 520,000 BTC accumulating at $67,000, and decreasing towards both sides from this peak, forming regional price support. I'm sure everyone remembers that for a long time afterward, BTC's price did not effectively break through this price range. Even on August 5 and September 7, when it began to move away from this range, the chip structure in this range remained intact. After some time, BTC's price would return to this range (creating attraction).
If we compare the current structure with that of July, they are very similar in shape, just not thick enough. However, it can already generate a very noticeable support effect; as time goes on, the more sufficient the turnover here, the stronger the support effect will be. Of course, if we want to break upwards, unless there is a quick surge far from this price range, otherwise, it will also be pulled back by 'attraction' (short-term high-level chips will create massive selling pressure).
From this perspective, we should no longer doubt whether on-chain data can truly reflect 'trading' behavior. It can even be viewed that BTC's on-chain settlement is a barometer of the overall activity in the cryptocurrency market and a certain quantitative form of macro sentiment.
(Figure 4)
Unlike URPD, which tracks and analyzes the original UTXO, CBD (BTC Cost Basis Distribution) is calculated per address. It better represents the overall behavior of network participants and clearly shows the trend changes in cost basis over time.
From Figure 4, we can see that when BTC price retraced to below $100,000 on December 8, the color changed from green to red, indicating an increase in supply (label 2). This shows that there was a significant amount of bottom-fishing behavior occurring at this time. The chips that entered the market experienced a rebound on December 16 and a drop again on December 23, but there was no significant reduction, with costs roughly between $97,000 and $100,000, forming effective support.
Additionally, the chips bought at the bottom when the price retraced to $96,000 on December 10 were sold when the price rebounded to $105,000 on December 16, which is why we see the color change from red to green (label 1); however, when it retraced again to around $96,000 on December 21, funds began to buy again. This part likely represents short-term trading behavior, which is also the main group involved in on-chain turnover in recent days (STH).
There are also quite a few chips stuck at high positions between $100,000 and $102,000, but they are relatively steadfast, and currently, there has been no obvious reduction.
In summary, current market sentiment is gradually recovering to a calm state, with liquidity decreasing. However, the chip structure remains in a 'healthy' state, with effective price support formed in the $92,000 to $100,000 range. Over time, as turnover becomes more sufficient, the support effect will strengthen (determining the lower limit). As for whether new highs can be reached or if the trend can be reversed, that will depend on the impact of macro policies on market expectations after entering January 2025.
