Glassnode: Top 10 indicators confirming market recovery

Glassnode: Top 10 Indicators That Confirm Market Recovery

Source: Glassnode

Katie Koo, Odaily Planet

Take   2022-23  Taking advantage of the transparency of the data on the chain, and taking into account market investor psychology, we set out to model typical investor behavior to determine if a cycle bottom is being formed, and these behaviors signal the beginning of a sustainable market recovery.

Identifying cyclical changes is not easy, and there is no "one standard". In order to identify the late market direction of the bitcoin bear market, we will explore the top 10 indicators tracking the recovery of the bear market.

This index uses various technologies and on-chain information, and finds that four basic market attributes are basically consistent with investor behavior patterns:

Technical: Mean reversion relative to popular technical analysis tools.

On-chain activity: On-chain activity and network utilization are increasing.

Supply dynamics: The supply of money held by long-term holders is saturated.

Profit/loss: The profit expenditure on the chain and the seller's "bullets run out".

Based on the definition of each indicator, current market conditions as of this writing will be summarized using the following terms:

untriggered

Be in progress

Complete confirmation

Index   1  : Look for the bottom price

The first tool we introduced is based on   200  D-SMA (200  Day moving average) technical indicators and realized prices in the chain cost basis of the bottom price detection model.

The first observation is that owning bitcoin is at least as good. 6  The investor group of a month usually becomes a holder in a bear market after the realization of the ceiling. 60%  -  80%  . Therefore, we will choose. 0.7 & have spent And use it as a counterweight to realize the price. This is a measure of the lowest valuation, which represents investors with the "firmest control."

Spot prices have closed below that level on fewer than one day of any trading day. 1.6% & have spent .

The second observation relates to the Mayer Multiple, which tracks spot prices relative to widely observed. 200  D-SMA  The deviation of Bitcoin's history suggests less than that. 4.3% & have spent The bitcoin trading day's Mayer multiple is lower than 0.6 & have spent This reflects the higher price. 200  D-SMA  There are more than 40%  The gap between.

Indicators: From the historical data, realized price * 0.7  And   200  D-SMA * 0.6  The intersection between pricing models occurs in the deep bear phase. This is the result of price stabilization by volume weighted on the chain due to investor accumulation. 200-DMA (200  Average difference index of days) and unweighted   200-DMA (200  The average daily difference indicator) continues to decline due to the downward trend in macro prices.

Status: Fully confirmed

Index   2  Rising demand

Sustainable market recoveries are often accompanied by an increase in online activity on the chain. Here, we consider the number of new addresses that appear for the first time. We compared monthly averages.

Metrics: when the new address of the   30D-SMA  Cross over 365D-SMA, and maintain at least   60  Day, it signals that network growth and activity is rising positively.

Status: in progress. 2022  Year   11  There was initial positive momentum at the beginning of the month. But, so far, it has only lasted a month.

Index   3  A competitive toll market

Another sign of growing demand for the Internet is a healthy rise in miners' income fees. This is the result of blocks becoming crowded and costs rising.

The following indicators use a momentum indicator, compared to the quarterly average. These momentum indicators are powerful when applied to on-chain activity indicators because they help capture institutional changes in network utilization and demand.

Index: in   90D-SMA (90  Intra-day moving average)

When   90D-SMA  Miners' incomes exceeded. 365D-SMA,  This is a sign that the block space is more congested and the toll pressure is increasing.

Status: Fully confirmed

Index   4  A broad recovery in economic activity

To demonstrate how the frequency of small transactions is significantly higher than that of large transactions, we developed a framework for evaluating the relative behavior of two small transactions.

The following volatility indicator is formed in such a way that a higher value indicates that more trading activity is occurring, while a lower value indicates less trading activity by the target group.

Indicator: Bear markets tend to result in significant declines in on-chain activity for entities of all sizes. Higher than   1.2 & have spent Value often defines the threshold for initial recovery and increased demand levels in the chain. As a result, both small and large entities recovered more than. 1.2 & have spent This indicates that network demand is recovering across the board.

Status: Not triggered. Both entities are still relatively inactive on the chain, but the smaller entities are gradually increasing their activities.

Index   5  A new wave of capital

One of the most powerful tools in on-chain analysis is to evaluate realized profits and losses, calculating the difference between the value at the time the token was dominated and the time it was repurchased. The realized profit/loss ratio provides a volatility indicator that tracks whether total realized profits exceed realized losses.

Here, we use the ratio for the long run. 30D-SMA (30  Daily moving averages) to get clear data and better identify large macro changes in network profitability. False positives do occur because of market volatility, but can be explained by considering larger indicator trends.

Indicators: realized profit ratio (P/L)   30D-SMA  Return to   1.0 & have spent Above all, this suggests that investors holding unrealised losses are weakening and that a new wave of demand can absorb the gains.

Status: Not triggered

Index   6  Bear the loss

A similar model of network profitability is aSOPR (Rate of Return on Output Consumed), which monitors profitability on a per-unit basis. aSOPR  Is a popular short-term market analysis tool that is usually very sensitive to macro changes in market sentiment because it reflects small retail investors and whales on an equal basis.

Here, we apply a longer term. 90D-EMA (90  Day's index weighted moving average) to better identify macro trend changes across the market.

Index: aSOPR  nbsp; 90D-SMA  Return to   1.0 & have spent Above, this suggests that the macro trend is shifting back to profitable spending on the chain. This suggests that a large proportion of on-chain market activity is profitable.

Status: Not triggered

Index   7  : A strong bear market bottom

In order to establish a strong bear market bottom, a lot of supply usually needs to change hands at a lower price. This reflects both capitulation by sellers and an equal and opposite inflow of new accumulated demand. The effect is to reset the average market cost base to more favorable and lower prices.

An early sign of a reversal of the macro trend on this basis is often a sharp spike in the percentage of total supply in profits. This usually happens with relatively small price increases. More interestingly, when the overall market outperforms the group of long-term holders, it usually only happens after buyers have emerged in large numbers at the top of the cycle.

Metrics: Because of the large amount of supply redistribution at bear market lows, the percentage of supply held by new buyers tends to be very price sensitive compared to long-term holders. So when supply as a share of profits exceeds that of long-term holders, it usually means there has been a massive redistribution of supply in recent months.

Status: Fully confirmed

Index   8  Hit the bottom

In a recent article, we developed a framework to assess investors' "resilience" to price volatility and how it affects the supply proportion of profits. This allowed us to simulate a situation in which sellers might "run out of bullets" and the effect of falling prices on stimulating additional seller activity waned.

Indicators: Deviation of correlation between price and percentage of profit supply   0.75 & have spent The following indicates that the relative price insensitive holder base is saturated.

Status: Fully confirmed

Index   9  : Confidence in the trend

When new investor confidence increases, it helps to identify reversals in macro bearish trends. This is often reflected in their consumption patterns. One practical way to measure this is to compare the size of unrealized profits in newly acquired (and held) tokens with the size of realized profits in spent tokens.

The following indicators are the differences between the cost bases paid by short-term holders.

Indicator: When the cost base of the spending entity is higher than that of the holding entity, we can conclude that the majority of new investors tend to hold and are therefore more confident of continued gains.

Status: Not triggered, but it is approaching a positive breakthrough.

Index   10  : Measure the pressure bottom line

The cost basis for a given market group of investors is equal to the total dollar value of their holdings divided by the number of tokens owned by that group. Thus, the chart below shows the cost basis of the two supply groups:

Loss of supply cost basis

Cost of supply basis in profit

After reaching the cycle peak (ATH), the market enters the demand deterioration phase and net wealth held in unrealized losses increases. We can measure the economic stress of the whole market by the supply pressure ratio.

Indicator: During the deep bear period, the ratio can reach much higher. 1.5 & have spent Reflecting the extent of economic pain that has spooked investors in the past. These spikes are usually followed by a sharp fall back. 1.0 & have spent The following.

Status: in progress. That ratio is now within the range of peak market stress, which historically would be enough to put most investors out of business.

summarize

Identifying cyclical changes is not easy, and there is no single indicator. However, due to the transparency of the blockchain, we can observe periodic patterns of behavior on the chain, which can then be "visualized" as indicators.

In this paper, we describe ten such indicators, covering a wide range of fundamental market attributes and investor behavior patterns. This set of indicators helps to find periods consistent with a sustainable recovery from a bear market. By seeking a convergence between multiple models, we can reduce reliance on any one indicator or concept and build a more reliable measure of market sentiment.

Here's what it looks like as of the time of publication. 10  Summary table of indicators. The Bitcoin market has yet to trigger most of these indicators, but we can go by this. 10  An indicator to track the development of new trends.

All metrics covered in this article.

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