Original author: Murphy, on-chain data analyst
The chip structure determines the lower limit of BTC price pullbacks.
Every event that drives changes in market sentiment is accompanied by a sudden spike in on-chain turnover. After filtering data, the average daily real on-chain turnover is usually around 100,000 BTC (7-day average), with weekdays having slightly more and weekends slightly less; if it exceeds 150,000, it is considered 'abnormal' data.
For example, the collapse of Luna in May 2022, the FTX crash in November 2022, and the bankruptcy of American banks such as Silicon Valley Bank and Signature Bank from March to April 2023 all brought extreme panic and anxiety to the market, with on-chain turnover peaks exceeding 300,000 coins (as shown in Figure 1).
(Figure 1)
From this perspective, we should no longer question whether on-chain data can truly reflect 'transaction' behavior. It can even be considered that BTC's on-chain settlement is a barometer of the entire crypto market's activity, as well as a certain quantitative form of macro sentiment.
We can see that after November, as Trump won the presidential election, market sentiment peaked, with an average daily settlement volume reaching 200,000. Such levels have only appeared again in March of this year, and high turnover also means a large influx of capital in the short term. After December 17, sentiment began to cool significantly, and by the 25th, the average daily settlement volume was around 120,000. Historically, after experiencing a peak, the retreat of activity also indicates that the market enters a period of calm, which is also the time when corrections are most likely to occur.
By tracking UTXO, we can distinguish on-chain turnover by different realized prices, which allows us to derive a very intuitive distribution of chip structure data, namely URPD (as shown in Figure 2).
(Figure 2)
From the current data, the on-chain structure is gradually forming a chip accumulation area within the range of $92,000 to $100,000, with a massive column of up to 600,000 BTC generated at $97,000, decreasing towards both sides from this peak.
The appearance of a massive column indicates 2 points:
1. This is likely not the absolute top price of the bull market cycle.
2. This price range has generated intense long and short battles, and a large amount of turnover has formed chip accumulation.
Where there are sellers, there are buyers, indicating that some people believe the price will fall further and want to hedge, while others believe the price offers value and want to bottom fish. It is precisely because of a large amount of bottom-fishing behavior that a strong support effect has emerged in the $92,000 to $100,000 range. Therefore, we say that the chip accumulation area has a 'damping effect' on the price, meaning that it creates resistance when trying to break through (not easy to penetrate), and creates gravity when moving away (pulling the price back).
If it is a cycle peak, there generally won't be too much divergence, only 'consensus.' When most participants reach a consistent understanding that the price is 'too expensive,' selling more and buying less naturally means 'topping.' Therefore, the emergence of divergence is not necessarily a bad thing; it is a necessary process of market self-repair.
If I had to give an example, a similar chip structure also emerged in July-August 2024 (as shown in Figure 3).
(Figure 3)
At that time, a chip accumulation area formed between $64,000 and $69,000, with a massive column of 520,000 BTC generated at $67,000, decreasing towards both sides from this peak, forming regional price support. I'm sure friends remember that for a long time afterward, the price of BTC did not effectively break through this price range. Even though there were starts to move away from this range on August 5 and September 7, the chip structure in this range was never destroyed. After a while, the price of BTC would return to this range (creating gravity).
If we horizontally compare the current structure with July, the forms are very similar, just not thick enough yet. However, it can already produce a very noticeable support effect. As time goes by, the more fully the chips are exchanged here, the stronger the support will be. Of course, if we want to continue to break upwards, unless there is a rapid surge away from this price range, it will also be hindered by 'gravity' (short-term high-level chips will produce significant selling pressure).
We can also observe similar conclusions from another perspective through CBD data (as shown in Figure 4).
(Figure 4)
Unlike tracking and analyzing the original UTXO with URPD, CBD (BTC Cost Basis Distribution) calculates data per address. It better represents the overall behavior of network participants and can clearly show the trend changes of cost basis over time.
From Figure 4, we can see that when the BTC price pulled back to below $100,000 from $12,800, the color changed from green to red, and the supply began to increase (Label 2). This indicates that a large amount of bottom-fishing behavior occurred at this time. The chips that entered the market during this period did not show a significant reduction after experiencing a rebound on 12/16 and another drop on 12/23, with costs roughly between $97,000 and $100,000, forming effective support.
Additionally, the chips that were bottom-fished when the price pulled back to $96,000 on 12/10 were sold when the price rebounded to $105,000 on 12/16, which is why we see the color change from red to green (Label 1); however, when it pulled back to around $96,000 again on 12/21, funds began to buy again. This group should be the main participants in recent on-chain turnover (STH).
A significant amount of chips that are still trapped at high levels between $100,000 and $102,000 also remain, and they are relatively steadfast; currently, no significant reduction has been observed. In summary, the current market sentiment is gradually recovering to a calm state, and liquidity is slowly decreasing. However, the chip structure remains in a 'healthy' state, with effective price support formed in the range of $92,000 to $100,000. As time goes by, the more fully the chips are exchanged, the stronger the support (determining the lower limit). Whether new highs can be achieved or whether the trend can be reversed will depend on the impact of macro policies on market expectations after entering January 2025. The content of this article is for communication and research purposes only and should not be considered investment advice.
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