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Bitcoin’s on-chain metrics might offer price peak foresight



Source: Unsplash

Bitcoin’s recent rally, although small and aberrant, was reminiscent of April 2019’s rally aka the April fool’s rally. Hence, looking at Bitcoin’s on-chain metrics might provide an insight into what transpired before the price peaked.

The recent rally caused Bitcoin to surge by a considerable amount [20% in 4 days] after a week into the new year. However, the rally was ephemeral and has already started retracing. At press time, BTC was priced at $7,900, just above a semi-major resistance at $7,800.

Bitcoin’s On-Chain Metrics

Token Analyst’s Jai Prasad recently put out a tweet thread showing an interesting correlation between Bitcoin’s price peak following on-chain metrics’ peak.

Bitcoin's on-chain metrics offers price peak foresight

Source: BTC/USD TradingView

The first metric was the on-chain transaction count which peaked at 450K on 2 May 2019, a time when the price of BTC was just $5,462.44. Following it was the total fees paid by all the transactions, a figure which peaked at 228BTC on 16 May 2019, when Bitcoin was priced at $7,987.81. The same was witnessed for active senders [~700K] on 14 June 2019, a time when BTC was priced in at $8,351.08. BTC’s on-chain volume also hit a peak of $2.36 million BTC on 18 June. A few weeks after the aforementioned metrics peaked, the price of Bitcoin hit a yearly high of $13,880.

Bitcoin’s Moving Parts

Although the following correlation was seen for the year 2019, it is not 100% certain that the same conditions might follow the price peak. There are a lot of moving parts for BTC; especially due to the fast-approaching halving.

It has only been 9 days into the new year and Bitcoin still has a long way to go. Keeping a closer eye on Bitcoin’s on-chain metrics might help catch this year’s rally; especially due to the narrative revolving around Bitcoin halving, something that makes the price of BTC surge.

As of 9 January 2020, according to glassnode, the total number of BTC held on exchanges was recorded at a staggering 2.15 million BTC. This suggests that about 11.84% of total BTC in circulation are being held on exchanges. Despite the many hacks that have caused losses of millions in funds, the amount held on exchanges keeps rising.

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Akash is a full-time cryptocurrency writer and an analyst at AMBCrypto. He is an engineering graduate with an avid interest in finance and economics. Attracted to the chaos of trading, Akash has invested in BTC, ETH and XRP for educational purposes.