Bitcoin may plummet after hashrate recovery?

The Bitcoin network’s mining sector continues its recovery this week, with an increase in hash rate and revenue per hash, according to the recent Glassnode on-chain data report.

This week, new historical highs in capital inflows were also evaluated, which would indicate an increase in ‘added cost’ – using the network’s Realized Cap as a metric. Is Bitcoin’s current strength a prelude to the downturn?

Recovery of miners

Half of Bitcoin’s network of miners was affected by the Chinese crackdown on the sector. “We are starting to see a recovery in the hash rate from the lows set in July.” as the Glassnode report says.

[Bitcoin Hashrate Live Chart from Glassnode - “A rede está minerando atualmente a uma taxa de 112,5 EH / s”.]
[Bitcoin Hashrate Live Chart from Glassnode – “A rede está minerando atualmente a uma taxa de 112,5 EH / s”.]

“As a result of this, we’ve seen that the miners’ net balance position has continued to increase over the past two months.”

Is Bitcoin’s current strength a prelude to the downside?

Analyzing the network’s “Realized Cap” – the price at which each coin was last moved –, Glassnode came up with two possibilities:

“The uptrends indicate that currencies accumulated at cheaper prices are being sold/used and the market must absorb this selling pressure to leverage itself”

Or “Down trends indicate that currencies accumulated at higher prices are being sold at a net realized loss, typical in bear markets.”

[Realised Cap Live Chart from Glassnode - “O mercado é capaz de absorver essa pressão do lado do vendedor”]
[Realised Cap Live Chart from Glassnode – “O mercado é capaz de absorver essa pressão do lado do vendedor”]

The chart itself already signals the answer: “Market demand is currently absorbing currencies sold with realized profits of a similar magnitude to the period from November to December 2020, before the main bull run.”

Having checked capital inflows at international brokerages, Glassnode understands that large buyers are piling up, while smaller traders are handing out their coins.

For the analysis company, “the body of evidence we described above – the miner’s recovery, strong currency outflows and increased selling pressure – favors current market conditions as well as a rise in market disbelief”.

[STH-NUPL Live Chart from Glassnode - "Semelhante à métrica NUPL padrão, esses eventos são incomuns, mas tendem a preceder movimentos explosivos em um mercado de baixa ou alta"]
[STH-NUPL Live Chart from Glassnode – “Semelhante à métrica NUPL padrão, esses eventos são incomuns, mas tendem a preceder movimentos explosivos em um mercado de baixa ou alta”]

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