Lame On-Chain Metrics Hint at Prolonged Bearish Cycle for BTC

  • Analyst firm Glassnode says sizeable investor losses and recency bias are likely to sustain a protracted bear market
  • Despite the unimposing number of daily active users currently, Glassnode notes that long-term hodlers are increasing linearly.

In its february 21 newsletterblockchain data and intelligence provider Glassnode suggested that Bitcoin investors are seeing a significantly growing number of motivations to sell their holdings.

As volatility pushed Bitcoin on either side of the $40k psychological support last week, it peaked near $45k but eventually closed near $38k. The blockchain analytics firm noted that external factors, including the anticipation of the Fed’s March meeting and global geopolitical issues, are the cause of declining price levels not only in Bitcoin, but also in the world. traditional financial markets.

“Weakness in both Bitcoin and traditional markets reflects persistent risk and uncertainty associated with the Fed’s planned March rate hikes, conflict fears in Ukraine, as well as growing civil unrest in Canada and elsewhere.” , is read in a section of the bulletin.

Glassnode explained that an extended bear market is likely to develop if this decline continues. The firm noted that this is the case as recency bias and losing leg weigh heavily on investor sentiment.

“The longer investors are pressured into their position, and the more they take a loss, the more likely the held coins will be spent or sold.”

Active entity numbers aren’t particularly impressive

Glassnode also noted a decline in user interest and demand, citing the declining number of active network addresses, which are now approaching the lower ends of a bear market channel.

Ideally, a bull market is associated with increasing user demand, evidenced by a growth in the number of active addresses during each bull run. Bear markets run counter to this, typically showing weakened retail interest and diminished on-chain activity.

The newsletter team detailed that even in bear markets, the lower bound of the bear market channel has remained in an upward trend, indicating that long-term Bitcoin storage addresses are continuously growing.

“The lower bound of this channel has historically increased in an almost linear fashion, suggesting that the pool of trusted Bitcoin users (the HODLers) continues to grow in the long run.”

Demonstrating just how much loss Bitcoin investors are taking, Glassnode found that short-term holders are priced at an average of $47,200 on a cost-added basis. This means that hodlers are bearing an average of 22% in losses at current price levels.

Bitcoin, at the time of publication, quote at $36,721, 6.28% less in the last 24 hours.