Unlike stocks and bonds, bitcoin transactions are recorded on a public ledger. It can track the balance and transaction history of each address, and investors can see who is on the other side of the transaction.
In fact, as long as some effective information is analyzed, it can be identified whether the current Bitcoin is in a bullish or bearish trend, and whether it is currently entering or exiting the market is more profitable. This article will bring you three data indicators that can help you quickly see market sentiment and price trends, allowing you to find effective investment basis and methods in this asymmetric market.
01 IOMAP model
The IntoTheBlock platform has a model called “In / Out of the Money Around Price” , referred to as the IOMAP model, which represents the profit and loss of the investor’s average purchase price relative to the current price. In other words, using this model, you can clearly see how many addresses are in a profit state and how many are in a loss state at the current price level.
If the average purchase price is lower than the current market price, then these addresses are “In the Money” and as long as they sell at this time, they will realize profits. Conversely, if the average purchase price is higher than the current market price, then these addresses are “Out of the Money” .
Many studies have found that investors are reluctant to sell assets when they lose money. Therefore, the IOMAP model can be used to predict key psychological support and resistance levels.
Take the example of BTC’s position at $ 9,500. Among all Bitcoin addresses, more than 64.9% of the addresses are profitable, while 34.6% of the addresses are loss-making, and the remaining 0.5% is balanced. This data shows that the investors behind BTC are more confident about future price increases. At the same time, once an adjustment occurs, as a leader in the cryptocurrency industry, there is sufficient support to absorb the losses caused by the sudden decline.
The IOMAP data above shows that at an average price of about $ 9377, more than 990,000 addresses purchased 657,000 BTC. Therefore, the price level of $ 9200-9500 is a huge barrier, and if BTC falls, it will provide strong support.
Looking at the other side, the resistance above $ 9520 is stronger than support. In the $ 9,500-$ 9,800 range, 1 million addresses purchased approximately 814,000 BTC. If bitcoin breaks through the above levels, investors who have been losing money may sell their holdings of bitcoin, thereby lowering the price of bitcoin.
02 On-chain transactions greater than $ 100,000
Another indicator that needs attention is the number of large transactions on the Bitcoin network. Large transactions represent that the Bitcoin whale is transferring assets. These people own millions of dollars in BTC, and they have a disproportionate impact on the price.
On IntoTheBlock, there is an indicator “All on-chain transactions with a value greater than 100,000 US dollars” . By observing the number of large transactions, it is possible to estimate the group of investors who operate around a specific price.
According to historical data, when the number of large transactions starts to increase, the price of Bitcoin will also increase; when the number of large transactions reaches the peak, the price of BTC starts to fall.
Over the past three months, the number of large transactions has been steadily increasing, from 5500 per day to nearly 14,000 per day, and the currency price has soared from the March low of $ 4,000 to around $ 10,000.
As you can see from the chart above, when the number of large transactions peaked on May 7, Bitcoin plunged 20% before halving. At present, this indicator has not fully recovered, which means that Bitcoin will adjust for a period of time before it rises further.
03 Growth of the Bitcoin network
The last thing to talk about is the “network growth” indicator. The growth of the network helps to assess the number of new users who join the Bitcoin ecosystem. The standard of measurement is the number of new addresses generated every day.
Santiment’s marketing director Brian once said that the number of new addresses is one of the most accurate price “fortune”, he said: ” In most cases, as the network grows, the price of the currency will also rise over time. . on the other hand, in a very long period of time, if the network growth rate continued to decline, usually it means falling value of the currency of the future. “
Under this premise, observing the growth of the Bitcoin network can indeed help to understand the general direction of the Bitcoin price.
According to IntoTheBlock’s “Daily Active Address” model, the number of new addresses on the Bitcoin network reached 510,000 on May 12, and since then, the growth rate of the Bitcoin network has declined every day.
04 Conclusion
These different on-chain indicators seem to provide a vague outlook on the future price of Bitcoin. It can be said that they are also an operational basis for when to enter and when to exit the market.
For example, using current data, Bitcoin is likely to spend more time on price adjustments due to the large number of transactions and the decline in the number of new addresses. Considering the IOMAP data (99 million addresses bought more than 657,000 BTC in the 9500 position), the market must continue to break through this huge resistance wall for a period of time, so that more pessimists can have full confidence in the future.
With some effective indicators and enough patience, it is possible to find a profitable method in the uncertain Bitcoin market and minimize the risk.