Research Summary

This report examines the current state of the Bitcoin market, focusing on the negative shift in investor sentiment. It explores various indicators to track investor behavior and market dynamics, including on-chain pricing models, capital rotation cycles, and the status of short-term holders. The report reveals that a majority of short-term holders are now underwater on their positions, indicating a dominant sense of panic among this group. It also notes a modest influx of new investors in 2023, albeit with weak momentum.

Key Takeaways

Market Position and Investor Sentiment

  • Market Languishing: The Bitcoin market is currently around $26k, failing to hold above the cycle midpoint level of $31.4k. This suggests a shift in market psychology and confidence.
  • Investor Sentiment: A super-majority of Short-Term Holders are now underwater on their position, indicating a negative sentiment among this group.
  • On-Chain Pricing Models: Two pricing models, Investor Price and Delta Price, are used to track market lows and highs. These models can also measure market recovery.

Capital Rotation and Accumulation Trends

  • Realized HODL Ratio: This indicator tracks the balance of invested wealth held within recently moved coins and more mature holders. It shows a modest influx of new investors in 2023.
  • Accumulation Trend Score: This tool reflects the balance change of active investors over the past 30 days. It shows significant accumulation into local tops above $30k, indicating a degree of FOMO among investors.
  • Realized Profit and Loss Indicators: These metrics measure the change in the value of all spent coins, showing a confluence between periods of intense accumulation and elevated profit-taking.

Short-Term Holders and Shifting Confidence

  • Underwater Holders: A significant proportion of Short-Term Holders are now holding coins at a loss, increasing the chance of seller exhaustion.
  • STH-MVRV and STH-SOPR Metrics: These metrics assess the magnitude of Unrealized and Realized Profit/Loss held by Short-Term Holders, providing a gauge on sell-side pressure.
  • Shifting Confidence: The report introduces a method to assess the trend direction of shifting sentiment for new investors, showing a degree of panic and negative sentiment among Short-Term Holders.

Actionable Insights

  • Monitoring Market Recovery: The on-chain pricing models can be used to monitor the transition from the deepest phase of a bear market back towards a market recovery.
  • Capital Flow Regimes: The Realized HODL Ratio can be used to track periods where capital flow regimes transition between bull and bear market structures.
  • Assessing Investor Behavior: The Accumulation Trend Score and Realized Profit and Loss indicators can be used to assess sudden changes in investor profitability and behavior.

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