On-Chain analysis: Using charts to understand the current state of the crypto market

In my previous on-chain analysis article, I mentioned that Bitcoin scarcity might happen sooner than expected.

This is because when looking at the chart above, on the exchanges, there is around 2.35 million Bitcoin left and there continues to be less supply over time. The current BTC supply is approx. 18.96 Mil; therefore, exchanges have around 12.39% of the current Bitcoin supply.

If we make an estimation, at a price of 40k BTC, that’s $94 billion worth of Bitcoin left on exchanges. (the $94 billion amount is assuming that price stays fix at 40k, I know that fix price is never the case, but it gives us a number to look at when looking at how much money in Bitcoin is sitting on exchanges)

In the chart below, I am going to compare May 2021 to the most recent dip in Jan 2022.

The May 2021 crash: May 11th-17th had 570k bitcoins in total inflows between those dates, and the following 7 days after that, had 835k BTC inflows. Too many Bitcoin flowed into Crypto exchanges over a 14 day period which caused the huge BTC price crashing from 56k to 34k.

During the recent Jan.19–26 dip (which was the biggest inflows on BTC so far in 2022) Bitcoin saw inflows of a little over 370k BTC total inflows during this 7 days. But there was an outflow of over 400k BTC within this date which is a negative netflow meaning there’s was more Bitcoin outflows compared to inflows.

For this next chart, let’s look at the average BTC exchange inflows.

In the middle panel of this chart is the BTC exchange inflow for the moving average based on 7 days (MA 7). Lately the average for this data has been dropping despite the price drops. This means that there’s less BTC inflowing onto exchanges.

So, to add more context to the entire picture of the entire market, if we look at outflows, BTC flowing out has also decrease in volume too. Both BTC exchange inflows and outflows have decreased in volume. I included the BTC exchange reserve so that viewers can observe the relationships of inflows/outflows to it.

In this next chart below, it is looking at the overall picture of inflows and outflows, known as netflow.

As I mentioned above, inflows and outflows have decrease. However, we have more outflows. On the bottom panel of the chart, we see downward patterns for netflow. Seeing mostly downward netflows is telling me that there is definitely accumulation happening for Bitcoin. People are buying Bitcoin and moving them out of crypto exchanges.

This explains why we are continuing to see BTC exchange reserve decreasing more and more.

The next chart I have here is interesting and really helps in painting a picture of the market.

Right now, we see that the exchange stablecoins reserve has been increasing. This is telling me that people are keeping their stablecoins on the crypto exchanges. Whale ratios on exchanges also exploded since the start of the 2nd half of 2021.

So far in this article, we have a decrease of volumes in BTC exchange inflows and outflows, but we see exchange stablecoin reserves and the whale ratio increasing.

This is telling me that people sold on exchanges and is holding the stablecoins on there. They haven’t spent stablecoins. And a lot of these holders are big bag holders and we know this by the spike in exchange whale ratios.

I do not know why people are not spending their stablecoins or why the stablecoins are just sitting on exchanges. (Maybe they get a yield that they’re content with on an exchange by using Stabecoins?)

If this population of user to decide to start buying then we’ll probably see a spike in either altcoins or the BTC price.

This next chart here looks at the overall UTXO, which is the unspent transaction output.

In this chart, I included the lead up to the 2017/2018 crash too so viewers can see what UTXO looks like during a crash. If we look at the red circle on the chart, right now, we’re still seeing around 7.8 mil BTC not being spent.

The chart below compare UTXO to BTC exchange inflow MA 99 to see what BTC exchange inflows look like in comparison to UTXO.

As an overall conclusion,

We saw both inflows and outflows decrease in share volume. Although, outflows are happening more then inflows causing exchange BTC reserves to continue to decline. What’s happening right now is that, people with BIG bags of stablecoins on exchange aren't spending it. We don’t know the cause of it as there are many valid reasons. Maybe these people might be getting a yield in return for keeping the stablecoins on the exchanges and they’re content with that yield.

This is telling me that things could go positively real quick.

A really positive good news can potentially quickly spike the prices to move parabolically. This is because we already have everything in place for a bull run.

• There’s a lot of whales on exchanges with stablecoins ready to buy
• BTC reserves has been declining and there’s not as much BTC supplies left to buy.

However, if really negative news hit the markets then we’ll probably see more inflows of BTC going onto exchanges to sell and the UTXO data will dip, telling us that people are spending their coins.

This article is not financial advise and is my analysis of the research I have done. This article is for entertainment purpose only.