In this new monthly publication series, we look at important indicators for the crypto markets both for short-term and long-term trends. Charts are found below each section.
Immediately upon interacting with a blockchain, much data becomes publicly available on a public ledger. Analyzing this data may provide crypto traders and investors with helpful insight into the present state of the market. In “The state of crypto”, we take a look at the most important metrics to observe the market based on transaction and trading activity. Our main focus is the two largest cryptocurrencies Bitcoin and Ethereum.
In the month of August, Bitcoin exchanges experienced a net withdrawal. Around 9% of the total supply is now left on exchanges in comparison to 12% at the beginning of the year. A lower exchange balance is usually associated with a decrease in potential selling pressure.
As a by-product, the lower exchange balance likely means that the ownership of many Bitcoins has moved from less to more sophisticated crypto holders since the latter often stores them away from exchanges. This is in line with our knowledge that particularly retail investors have left the crypto market this year. It suggests that long-term holders have been interested in acquiring Bitcoin at these prices, while they have not moved existing Bitcoins, as stressed by the moving average for dormant circulation. It may indicate that long-term holders are not willing to sell at this price.
On the other hand, Ether was net sent to exchanges in August. As a result, slightly more than 14% is held on exchanges. This is likely due to the surge of Ethereum in July and August, in which Ethereum surged by over 100% from its low in June, which has increased selling pressure. This is further stressed by the dormant circulation, which shows that more old Ether were moved in July and start-August. It has, though, decreased to the level prior to the notable price increase. Yet, this might likewise have been impacted by the upcoming Ethereum merge, in which event holders are arguably more comfortable in holding Ether on exchanges.
For the past months, both Bitcoin and Ethereum have been priced higher compared to their daily transacted volume. This means that the market values their utility higher, effectively meaning there is more room for a downward trajectory but less room for an upward trajectory when looking at this metric.