Welcome to Barmy’s weekly on-chain analytics episode.

General Information

BTC in the past week has been volatile in the area of ​​​​$22,500 – $24,500. From our view, in short term, BTC will reach the important resistance at $26,000. If it breaks, we could see the next crucial level at $28,000.

However, Bitcoin will be likely to drop to the nearest support level at $22,400.

Moreover, this month, we will see The Merge of Ethereum. Investors should be careful with this level and consider taking profit before this important event happens.

Source: TradingView

Meanwhile, the Fear & Greed Index is at 44.

Source: Alternative.me

Last week, the Fear & Greed Index is always above 40. This measure shows us that the investors are much less fearful than before and they have had a positive look at the crypto market.

Overview of the economy

This week,

• Bank of Australia has a meeting on monetary policy on Tuesday and the unemployment rate on Thursday.
• Banks of Canada and the UK release CPI. (England’s bad prediction pushed the pound to the Mekong riverbed).
• Bank New Zealand announced the official cash rate, which is expected to increase by 0.5%.
• In USD, there will be retail news on Wednesday and FOMC meeting at dawn on Thursday.
• Inflation in Argentina last July was 71%. The country responded by raising interest rates to 69.5%
• China’s youth unemployment rate hits a record 20%. China’s central bank unexpectedly cuts interest rates.

Source: ForexFactory

ANALYSIS

On-chain data shows Bitcoin rally led by the derivatives market.

Comparing the growth between the number of new open derivatives contracts (Open Interest) and the number of active addresses of BTC, the investors could see the interesting point.

From the below charts, investors could easily see that the Open Interest index has been growing recently. Meanwhile, the number of active BTC wallets has been steadily decreasing for 3 consecutive months.

Source: CryptoQuant

Source: CryptoQuant

From there, it is likely to be that BTC’s recovery may not come from on-chain activity on the network but from the derivatives market.

Another comparison below could support the above prediction. The investors could look at the amount of BTC pouring into spot and derivatives exchanges.

Source: CryptoQuant

When the investors witnessed a decreasing number of Bitcoin poured into spot exchanges. On another hand, the number of Bitcoin poured into derivatives exchanges has been surging.

Source: CryptoQuant

There is a high possibility that not when on the derivatives floor, investor sentiment often fluctuates quickly. This makes it easy for them to change their position in the face of important news such as the Fed’s interest rate hike, and the recent announcement of the July US CPI.

When looking at the Bitcoin: Exchange Reserve, the investors could see that this metrics has been decreasing since July 2021. This indicators supports the viewpoint that the BTC hodlers keeps withdrawing their assets to cold wallet to store. A big pump in the middle or long term is something the investors could think about.

Source: CryptoQuant

Besides, when looking at the Bitcoin: MVRV (Market Value to Realized Value), which is defined as an asset’s market capitalization divided by realized capitalization, this metrics has been increasing recently and start exceeding the ‘green’ zone. Historically, when this value goes over ‘3.7’, it indicated that the BTC price is on the top and when this value goes below ‘1’, it indicated that the BTC price is at the bottom.

Source: CryptoQuant

Now, it is arround 1.1. A positive signal gives the investors a hope that the market established a dip and started reversing.

Conclusion

Some on-chain data show positive signals from the market. It is a great time to start DCA for long-term holders. However, scalping-style traders should be more careful with this current volatile market.

All information above is NOT financial advice. Please do your own research.

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