⛓️Block On Chain 010⛓️
November 8-14. A pump then a dump📈📉
Good Evening Investors,
What a crazy week with volatile movements reaching highs and lows. This week Ethereum was able to again crack ATHs at US$4870 before sweeping back to previous weeks support at US$4450.
Macro
This week was filled with ups and downs with due reason. Bitcoin was able to start the week strong breaking past US$63 000 resistance and proceeded to create a swing to new ATHs at US$69 000 from US CPI numbers being released. CPI (Consumer Price Index) is the formal statistic for how the US measures inflation. The CPI numbers revealed that inflation is at a high of 6.2%, the largest inflation growth in 30 years. Funny considering the Fed signaled for a taper in inflation the week prior. Bitcoin’s rise in price is because Bitcoin is an highly liquid inflation hedge due to it’s disinflationary monetary policy - this is long term bullish.
Price later reverted to US$63 000 due to news of the US$300B Chinese real estate firm Evergrande defaulting. The default news was later adjusted as the firm was able to avoid default for the third time. The news overall spooked all markets, crypto and equities, leading to a pull back in crypto wiping out US$535M leveraged Longs.
Lastly, in regards to Bitcoin, the protocol was able to successfully soft fork upgrade to Taproot! This is the first soft fork upgrade to the Bitcoin protocol since SegWit in August 2017 and proves to improve upon the base protocol:
Taproot soft fork introduces the concept of Merkelized Abstract Syntax Tree (MAST) to improve the scripting capabilities and privacy of the Bitcoin network.
The last soft fork upgrade SegWit was a bullish catalyst in 2017. We will see how this news plays out in price action in the coming weeks, overall it is bullish for the protocol.
On-Chain
A midst the wild price action this week, on-chain data continued to trend in favor of long term Bulls. Ethereum appears to show that market participants are still accumulating the asset.
A look at Balance on Exchange is quite telling. Despite the downturn in price from the week’s high, market participants continued to withdraw their Ether off of exchanges. This trend continues to show demand for Ether and market confidence in asset appreciation. It also creates more scarcity and illiquidity in the amount of Ether available to be sold on exchanges, which is now < 12%. Scarcity via demand of an asset generally leads to price appreciation - Bullish.
Ethereum’s Address with Balance - All Balances also shows bullish accumulation behavior. Address with Balance is a metric that the number of unique addresses holding at least (#) amount of coin. This metric represents newly minted addresses that are accumulating Ether. As we can see, the trend of smaller cohorts acquiring more Ether is in an uptrend with an ATH of 6M unique addresses holding > 0.1 ETH - Bullish.
Conclusion
The week ended with a relatively bearish note when looking at the price action. Bitcoin and Ethereum were able to make short-term swings to ATHs before reverting back to the previous weeks resistance levels.
On-chain however shows a clearer lens of what is happening below the surface. For Ether, the data reviewed shows market participants behavior to be bullish via accumulation of the asset. Currently, the supply of Ether is being met with a higher demand leading to long term price appreciation. As always, short term price action means nothing once zoomed out - bullish or bearish.
These price levels appear to be good buying opportunities for long term holders looking to accumulate more Ether. In the next coming weeks I will be on the watch for distribution of larger hands selling into demand as a sign for this refueled bull market kicking off.
-Kadeem
This weeks newsletter marks the Tenth edition of Block on Chain! A special thanks to all the readers and supporters of this newsletter!❤️
For more daily on-chain and technical analysis content feel free to give me a follow on Twitter.
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