YEREVAN (CoinChapter.com) – Bitcoin touched the $25,000 resistance on Feb 21 but could not break above it and settled around $24,500 ahead of the New York session. So, is the flagship crypto ready for a confident rally above the said resistance? These on-chain metrics say YES.
Bull #1 – UTXO set growth
In detail, the emergence of Ordinal NFTs and Inscriptions on the Bitcoin blockchain in Feb 2023 introduced a new way of storing data on the blockchain. As a result, they boosted the on-chain activity with a relatively light coin transfer volume footprint.
As a result, the analytical platform Glassnode detected a surge in the total number of UTXOs. The latter is the unspent transaction output or the amount of digital currency someone has left remaining after executing a cryptocurrency transaction.
The chart below shows that the total number of UTXOs in the set reached a new ATH of 137M. The UTXO count increased at a rate of 117k per month last week, the highest since Dec 2022.
commented Glassnode.
The UTXO number growth historically coincided with bullish phases. Thus, the current green streak could signify the end of the bear market for the flagship crypto.
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Bull #2 – Short-term holder dormancy increase
Glassnode weekly report also testified to the growth of the dormant supply in both the short-term holder cohort (STHs) and the long-term holders (LTHs). The Dormancy metric is instrumental in determining market participant behavior and making predictions concerning the holders.
In detail, the STH Dormancy reflects the average age (in days) of coins spent by the STH cohort. Moreover, a sharp upward move in STH-Dormancy suggests that STHs spend coins with a more extended holding period. This behavior is typical for bullish phases, as gain expectations spur the investors to hold their BTC.
Also read: Bitcoin Eyes $25K amid $86M Short Liquidations – But Macro Headwinds Persist.
Bull #3 – long term Bitcoin holder’s realized loss peaks
Along with the short-term holders in profit, the metrics reflecting the behavior of long-term holders are equally important. Glassnode’s chart below shows the gradual increase in LTH loss dominance.
The report characterized the process as the “top buyers of the prior cycle are progressively shaken from their position until the final washout.” Thus, a spike in the metric indicates a bear market bottom and an upcoming turnaround.
Of all realized value on coins sent to exchanges, LTHs in loss have declined dramatically from a cycle peak of 58% in mid-Jan, to 21% today. Similar sharp declines in the metric can be seen in each prior cycle as LTHs find the necessary hope to HODL once again.
read the report.
Also read: Top 5 Stocks to Buy in February 2023.
Warning signs from the Federal Reserve persist.
The recent CPI report marked the January inflation at 6.4%, which is still far from the ‘healthy’ 2% inflation the Fed aims to achieve. Nevertheless, it means that lawmakers will likely implement more interest rate hikes in the current year to tame the rapid rate of the decline in buying power.
Greg McBride, the Senior Vice President, and Chief Financial Analyst at Bankrate, agreed. He told CoinChapter that “the lack of substantive progress will underscore the Fed’s message about continuing to raise interest rates.”
There has been progress in the inflation rate of prices for goods. But the trend to follow is in the prices for services, where labor shortages are most pronounced. Services, subtracting out the cost of rent, increased 0.4% in December and was up 7.4% in 2022.the expert asserted.
One of the interest rate ‘side effects’ is an imminent decline in stock prices, as investors hesitate to put their confidence in risk-on assets. Given the high correlation between the stocks and Bitcoin in the previous year, the Fed’s decisions will also be mirrored in BTC prices.
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