On-Chain Metrics Suggest a Bearish Outlook for Bitcoin

Blockchain analytics provider Glassnode has described a bearish scenario for Bitcoin, as on-chain indicators point to imminent selling pressure.

In a weekly analysis on Feb. 21, on-chain metrics firm Glassnode said Bitcoin bulls “face a number of headwinds,” referring to increasingly bearish network data.

The researchers point to general weakness in mainstream markets and broader geopolitical concerns as reasons for the current risk-off mood in crypto assets.

“Weakness in Bitcoin and traditional markets reflects ongoing risks and uncertainties related to the Federal Reserve’s interest rate hike in March, concerns about conflict in Ukraine, and growing civil unrest in Canada and elsewhere.”

It added that as the downtrend deepens, "the likelihood of a more sustained bear market is also expected to increase." Bitcoin is currently trading 47% below its all-time high in November and has been trading for the past 15 weeks. A downward trend.

The lack of on-chain activity is one of the clear signs that the Bitcoin market is bearish. The number of active addresses, or entities, is currently at the lower bound of a bearish channel, which describes on-chain activity during market sideways or downtrends, indicating declining demand and interest.

Glassnode reported that roughly 219,000 addresses were wiped in the past month, suggesting this may be the beginning of a period of user exodus from the network.

It calculates that short-term holders realized a price of $47,200 on a total cost basis, implying that those who still hold the asset have an average loss of about 22% at current prices.

“The longer investors remain underwater on their positions, the more they are caught in unrealized losses and the more likely their holdings are to be spent and sold.”

There are several other calculations of long-term and short-term positions on-chain, conclusively concluding that there are a total of 4.7 million bitcoins underwater right now. It added that more than half of that, or 54.5%, was held by short-term holders (less than 155 days) who were "statistically more likely to spend it".

Crypto Twitter has also been flooded with bearish sentiment over the past few days, with the Bitcoin Fear and Greed Index currently recording 20 — “Extreme Fear.”

At the time of writing, the BTC price is down 6% over the past 24 hours, trading at $36,738, according to data from CoinGecko. The price of Bitcoin is now very close to its lowest level in 2022, just over $35,000 on January 23.

On the positive side, Cointelegraph reported on Feb. 19 that the inactive Bitcoin supply is near record levels, with more than 60% of all Bitcoins not being used for at least a year. 3AC co-founder Zhu Su commented that many of those who bought BTC in 2017 and 2018 are still hoarding, adding: “It’s interesting that many of these people are staying humble this time around and buying every month, No matter what else happens."