The team at digital assets firm Kraken notes that after a “predictably underwhelming” September in the crypto-asset markets, “history was made in October as BTC hit new all-time highs.”
Kraken wrote in an extensive report that, as foreshadowed last month, data “indicates that a supply shock (driven by long-term holders) contributed to BTC’s rise to record levels.:
In Kraken Intelligence’s latest Crypto On-Chain Digest, S H O C K T O B E R, the team looks at the “impact of BTC’s supply shock, how whales and long-term holders are leading the charge and why on-chain metrics suggest that the bull run still has significant upside.”
HODLer’s Paradise
As noted by Kraken:
“BTC’s HODL Waves, an indicator that provides insight into holding and spending behaviors, paints a picture of a market that isn’t ready to sell yet. Long-term holders have failed to react to September’s weakness or October’s strength — and instead continue to accumulate.”
They added that since late May 2021, ‘young coins’ (those moved within six months) have been “maturing as they’re increasingly being held for the long-term. ” The percentage of young coins has “dropped by 11.8 points to lows that haven’t been seen since November 2018, when BTC was trading at ~$5,700,” the update from Kraken revealed.
Diamond-Handed Miners
The report also noted that it might come as a surprise that miners, too, “appear to be holding for the long-term.” As mentioned in the update from Kraken, 0-hop supply is a simple metric to “determine mining pool behavior, as it tells us whether the validators of the Bitcoin network are holding the coins they’ve mined.”
It assumes that coins “that have not moved (or ‘hopped’) at least once have not been sold or paid out to miners,” the report explained.
As stated in the report:
‘The 0-hop supply has risen by almost 50% since September, and the leading North American pools have publicly reported holdings of more than ₿20.4k ($1.3B). On the other hand, 1-hop supply (generally attributed to small miners who mine using a pool) shows that small miners took some profits. However, now that this trend appears to be reversing, this supply shock could be exacerbated as these players stop selling, too.”
Bulls on Parade
The report continued:
“A supply shock, spurred on by long-term holders, whales, miners and increased network demand put BTC in a strong position to trend higher. But we need to turn to quantitative indicators to get a better feel for its place in the current bull run.”
The report also mentioned that SOPR (Spent Output Profit Ratio) “attempts to give us an answer by approximating whether market participants are selling at a profit or loss.”
Given a recent bounce, and going off historic movements from September 2020, it “would appear that strong support is established at the ~$42,000 level,” the report noted while adding that it also “confirms that the recent pullback was a healthy retracement, and not a full-blown reversal.”
The MVRV (Market-Value-To-Realized-Value) Z-Score “estimates whether BTC is in oversold or overbought territory,” the report noted while adding that it “currently sits below the halfway point between these two thresholds, suggesting that there’s still room for BTC to run.”
To access the complete report, check here.