Bitcoin analysts chart the key bull and bear cases for BTC’s price action

Research has detailed Bitcoin’s recent record low volatility, and while traders are anticipating an eventual price breakout, the October 26 BTC price of $21,000 is yet to be interpreted as confirmation that $20,000 has now become support.

In a recent “The Week On-chain Newsletter”, Glassnode analysts charted a bull case and a bear case for BTC.

According to the report, the bearish case includes limited on-chain transaction activity, stagnant non-zero address growth, and reduced miner profits, posing a strong risk to Bitcoin sales, but data also shows that long-term hodlers are more determined than ever to weather the current bear market .

The bull case, on the other hand, involves an increase in whale wallets, outflows from centralized exchanges and hoarding from long-term investors.

Growth in new address stopped

Active on-chain address growth remains stagnant across the entire BTC network. A reduction in transactions means a reduction in utilization and user growth for the network, factors that could potentially hinder BTC price expansion.

New addresses within the Bitcoin ecosystem that have a non-zero address have also plateaued, a trend that also took place in November 2018. Stalled growth in new non-zero addresses back in 2018 was followed by a BTC price drop that didn’t pick up until January 2019, when this metric started to increase.

Related: Public Bitcoin Miner Hash Rate Booms, But Is It Actually Bearish For BTC Price?

Miner sales can trigger another sale

In previous years, many BTC miners held large amounts of BTC in their reserves. However, since the beginning of the bear market, many miners are selling BTC to cover their capital costs and operating expenses.

With BTC mining production costs rising against a backdrop of falling revenues, miners are cutting back by selling their newly mined BTC. Glassnode warned:

“Events of miner leverage could lead to distribution in thin order books, historically low demand and continued macroeconomic uncertainty and liquidity constraints.”

As the price of BTC drops and miners’ profitability shrinks, miners may be forced to liquidate more of their Bitcoin reserve.

Whales gather

Despite the falling BTC prices, many BTC whales who have a surplus of 10,000 BTC are possibly increasing even in bear market conditions. As shown in the chart below, they continue to accumulate BTC after distribution in April and September.

BTC withdrawal from centralized exchange can reduce selling pressure

Funds moved from centralized exchanges weaken the immediate selling pressure on the market. Coinbase, one of the highest volume centralized exchanges, is seeing large amounts of BTC withdrawals. When comparing the current BTC outflow from Coinbase to the post-March 2020 peak on the exchange, over 48% of the total BTC on the exchange has been transferred.

Glassnode points out:

“Coinbase has seen a very large net withdrawal of -41.6k BTC this week. […] It is important to note that these outflows are based on our best estimated wallet clusters, and appear to be a combination of coins flowing into both investor wallets and/or institutional custody solutions.”

Hodlers keep hodling

According to the Realized Cap HODL Waves metric, the total USD wealth held in BTC, valued at the time of each coin’s last transaction, is now disproportionately skewed to long-term holders. The proportion of wealth held in coins that have moved over the past three months is now at an all-time low. The reciprocal observation is that the wealth held by coins older than three months (increasingly held by hoarders) is now at an all-time high.

Some Bitcoin analysts believe BTC’s low volatility during this period is “a calm before the storm”, and the current macroeconomic and price rise of BTC may show the hodler’s determination as the winning factor.