Bitcoin On-Chain Analysis Series (July 12, 2021): An Uptick In Positive Whale Activity, Exchange Flows Are Down, And Stablecoins Inflow Is Increasing

Bitcoin is going sideways for the last two weeks between the $32K and $36K range. In the last week of our Bitcoin on-chain analysis series, we discussed that the accumulation has been increasing from the small retail investors, miners were selling, and whales were pretty dormant. The net entities (new users) growth on the network has been phenomenal since the last month.

This week, Bitcoin is showing some bullish signals as we saw an uptick in the positive whale activity as they came out of the dormancy and started buying heavily. This increasing whale activity for accumulation shows the vote of confidence in the price action. When whales start to accumulate, it becomes easier to break the strong resistance levels.

The Bitcoin exchange outflow is increasing, and more than 17,794 BTC have left the exchanges this week alone. When Bitcoins move off the exchanges, it gives a clear 'buy' signal as it reduces the exchange supply and puts upward pressure on the price action.

Stablecoins exchange inflow was on the sidelines, but they have slowly started to flow back in. Stablecoins inflow has historically shown an assertive accumulation behavior. Let's dig a little deeper into the on-chain analysis for Bitcoin and see what clues we can gather by understanding the market's behavior.

This week, we have seen an increasing number in the growth of the new entities (users) joining the network. Last week, 30,000 new users joined the network every single day, which has increased to 50,000 new users adding on to the network every day this week.

The net growth in the new entities joining the Bitcoin network is at all-time highs, and we have never witnessed this growth since the inception of Bitcoin. There is not a strong correlation between new users joining the network and the price of Bitcoin, but it shows a trend towards more accumulation which is healthier for Bitcoin's price action.

The growth in new entities (users) joining the network | Source: Glassnode

Next up, we will look at the supply held by entities with 1K-10K BTC balance, AKA the whales. Over the last couple of weeks, whales have been very dormant, and we didn't see much activity coming up from whales. On the contrary, major accumulation came from smaller retail investors.

This week, however, the whales have come out of their dormancy and have started accumulating. This week alone, 17 new whales were created, and the overall whale holdings have been increased by +65,429 BTC. Historically, whale accumulation has moved the market through strong resistance levels compared to retail investors.

Bitcoin supply held by larger entities (whales) | Source: Glassnode

Bitcoin liquid supply ratio tells us the spending behavior of entities that are long-term holders, and they have a very low history of selling. These entities buy back the coins from the speculative traders in the market when they see the confidence in the network. If the liquid supply ratio increases, it means that these long-term holders are coming back into the accumulation phase.

Over the last two months, as Bitcoin price has fallen down, we have seen that these long-term holders are constantly stacking up their holdings with newer coins. This ratio also shows a strong correlation with the price of Bitcoin. It will be interesting to see if this buying behavior from long-term holders continues to rise in the coming weeks.

Bitcoin liquid supply ratio | Source: Woobull Charts

Next up, we have the Stablecoin Supply Ratio (SSR) Oscillator. It is a ratio of bitcoin supply and stablecoin supply denoted in BTC. If this ratio is low, it means there is more buying power for Bitcoin in the market, and you can get more Bitcoins for a lower dollar value. If this ratio is high, the buying power for Bitcoin is lower. The SSR Oscillator was created by a famous on-chain analyst Willy Woo.

Earlier this week, stablecoins have started to flow back in, which shows a clear 'buy' signal for Bitcoin. The stablecoin inflow pattern we see today closely resembles the pattern we saw back in late 2018, March 2020, and September 2020. Bitcoin is leaving the exchanges with a higher outflow, and together with the increase in the stablecoins inflow, we see a clear bullish signal.

Stablecoin supply ratio oscillator (SSR) | Source: Glassnode

Over the last few weeks, the on-chain analysis indicates that Bitcoin is getting more stronger as both retail investors and whales have started accumulating, exchange outflows have increased, and long-term holders are buying heavily. The stablecoins inflow also provides a strong signal that these accumulations will keep on piling up, and it will be easier to break the upcoming strong resistance levels.

The question from our last week's series still remains. Do you think Bitcoin is ready to break into the $40K range?

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