The crypto rebound is alive and kicking.
Over the past few week, the price of bitcoin soared 10.2%, currently trading at $23,076, and the ethereum price climbed 23% to just under $1,700. Most altcoins are following the majors’s suit. XRP
Crypto saw the biggest gain in the wake of the Fed’s 75 basis point hike, which jokingly earned itself the name of “a bullish rate hike.” The counterintuitive crypto response, however, has a rather simple explanation.
Fed Chair Powel did a good job intimidating investors and the market simply priced in a larger hike. So, 75 basis points were more of a relief, which boosted all risk assets, including crypto.
Now the bigger question: is this rally the beginning of a bull market or a “dead cat bounce”?
In the most recent report, Glassnode highlighted three on-chain statistics, which point to dwindling blockchain activity:
- The number of active bitcoin addresses keeps slumping from the peak it reached last October. “With exception of a few activity spikes higher during major capitulation events, the current network activity suggests that there remains little influx of new demand as yet.”
BTCtransaction volume and total fees are still within a “bear market” range. For reference, transactions are down ~40% from their Jan 21 peak and fees barely reach 14 bitcoins per day while last year they were ranging from 50 to 200+ bitcoins per day. “Whilst we have not seen a notable uptick in fees yet, keeping an eye on this metric is likely to be a signal of recovery,” Glassnode wrote.
ETHeum manifests similar symptoms. While its price has gone up over 50% within the past month, its on-chain activity remains rather lackluster. Ether’s transaction volume has been in decline since last May and its fees (aka gas prices) are at “multi-year lows.”
What could launch crypto into another structural bull market?
Glassnode’s on-chain analysts suggest that an inflection point could be the capitulation of long-term crypto holders (aka HODLers), which are more sensitive to crypto prices than newcomers.
As Glassnode wrote: “Bottom formation is often accompanied by [long-term holders] shouldering an increasingly large proportion of the unrealized loss,” the report stated. “In other words, for a bear market to reach an ultimate floor, the share of coins held at a loss should transfer primarily to those who are the least sensitive to price, and with the highest conviction.”
The much-awaited crypto redistribution may be near.
Glassnode spotted first signs of “HODLer capitulation” in June. In a July note, its analysts wrote: “The $20K region has attracted a large cluster of Short-Term Holder coin volume. This is a result of a significant transfer of ownership from capitulating sellers, to new and more optimistic buyers.”
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