Thursday, 30 March 2023

Crypto News

Bitcoin on-chain data and BTC’s recent price rally point to a healthier ecosystem

Bitcoin on-chain data and BTC’s recent price rally point to a healthier ecosystem

Bitcoin (BTC) had a rough year all throughout 2022.

But fresh on-chain and futures market data show positive signs that the leading cryptocurrency by market capitalization has started to recover.

After a bevy of short liquidations, the futures market is pointing toward renewed equilibrium. According to data from Glassnode, short position liquidations cleared out unhealthy market speculators, on-chain and exchange data now point to an improving spot market and exchange netflows.

A large group of investors that were previously at a loss is now back in the category that Glassnode analysts label as “unrealized profits.”

Massive short liquidations set the groundwork for new investors to thrive

Futures data typically hold an equilibrium between longs and shorts. As the market moves, investors tend to update their futures to avoid liquidation. Conversely, in mid-January investors were caught off guard which resulted in an all-time high of 85% short liquidations.

Futures liquidation long versus short ratio. Source: Glassnode

The short liquidation dominance has helped fuel the current Bitcoin rally. In January 2023, over $495 million in short futures were liquidated. Liquidated shorts create automatic Bitcoin purchases thus driving up the BTC price. The year-to-date liquidations have three large waves that peaked at $165 million in one day of liquidations.

Total liquidations. Source: Glassnode

After the historic amount of short liquidations, the futures market is trending towards longs. On Jan. 30, 51.46% of open interests are long positions rather than shorts.

Long versus short ratio. Source: Coinglass

The liquidation of shorts not only helped Bitcoin price rally but also seemingly suggests a return of positive sentiment in the BTC market.

Glassnode researchers said:

“Across both perpetual swap, and calendar futures, the cash and carry basis is now back into positive territory, yielding 7.3% and 3.3% annualized, respectively. This comes after much of November and December saw backwardation across all futures markets, and suggests a return of positive sentiment, and perhaps with a side of speculation.”

Bitcoin annualized premium. Source: Glassnode

Centralized exchange netflows reach equilibrium

In March 2020 centralized exchange (CEX) Bitcoin balances reached an all-time high. Since the all-time high was reached, Bitcoin has flowed out of spot exchanges. Approximately 2.25 million BTC are currently held across 21 of the top exchanges, which is a multi-year low….

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