⛓️Block On Chain 017⛓️
Week of December 27-January 2. New year, same old
Good Evening Investors,
I hope everyone is continuing to enjoy their year end holidays. This newsletter will be brief as not much as changed in regards to crypto in the past week. When looking at the Bitcoin/Ethereum charts we can see price more or less continued to range ending the week red.
As mentioned last week, the macro landscape has continued to remain quiet, at least until the new year officially kicks off. Thus far, no impending news has made it’s way into the crypto market.
I am still awaiting to see what this new year brings in terms of asset allocation. With monetary policy changes to combat inflation this is technically not a good sign in risk-on assets. For the time being, inflation still remains high and asset allocators need to allocate accordingly for a reasonable return.
For a more detailed analysis on what the current monetary policy changes could signal, definitely give this thread a read:
A major milestone for Bitcoin was however accomplished to start the new year: Bitcoin has reached a new ATH in Hashrate since the China ban in May/April 2021. This is a well welcome accomplishment that showcases the resiliency and anti-fragility of the network. Transactions still continue to be validated, blocks continue to be produced - amazing.
A look on-chain going into 2022 continues to leave me with a mixed sentiment for the short term. In regards to Ethereum, on-chain shows market participants appear to continually be net sellers.
As we continue in the current downward range of price action we can see that Exchange Net Position Change shows inflows to exchanges have indeed continued to increase. This signals that the majority of exchange interaction with Ether continue to be inflows and are likely net sellers. This in itself is not completely bearish, as mentioned in previous weeks, due to the reasons that this behavior is likely because of capitulation + EoY obligations/activities taking place but is not necessarily bullish either.
When we remove the outflow/withdrawal data from the same chart, we can see how there is a overwhelming majority of times that these inflows can signal bottoms/reversals in price. This isolated view shows the result of capitulation, often at times of price lows and ranges. This eventually becomes the transfer of coin from the current weak hands in the market transferring to current stronger hands.
I am currently still looking for a resume in accumulation once these current market participants finish selling, as they usually do, to shift my sentiment from neutral to bullish. Considerations such as several up weeks in Ethereum price action, along with no exuberant price rally leading to a blow off top prior to this ranged dip leaves me to believe this is another cool off period of wealth transfer for the next run.
In general most of the market continues to be slumped and moving sideways. As many market participants are on holidays still, I do not expect too much market movement until mid next week.
Currently, the market volume remains to be low and again as mentioned there is not a lot transpiring on the macro side of the market which is a large driver for market movements outside of supply and demand dynamics. A price action driven market is still in play until we get a spark making this a great opportunity for long term holders to accumulate as they see fit. In my experience sticking around when a) others are fearful/selling and b) the market is boring makes for the most profitable opportunities.