Bitcoin’s On-Chain Market Cycles
This article is a collaboration by Glassnode and Bitcoin Magazine to introduce Bitcoiners to the world of on-chain analysis. Our aim is to simplify, demystify and improve access to on-chain data, helping you take the first steps into using these powerful new tools.
Bitcoin is a free market for exponential, digital monetary technology. It has attracted interest from all manner of investors ranging from the individual right through to global institutions. Number go up technology has driven both speculation and investor conviction, as the thesis of digital sound money is tested, challenged, and ultimately proven through price performance and adoption.
Within that context, bitcoin has proven to be a cyclical asset, with extreme price run-ups and lengthy and significant draw-downs. At all stages in these cycles, there are pools of people buying, selling, holding, transacting and mining within the Bitcoin network. To fully understand the psychology and characteristics of these market cycles, there are few data sets more suitable to study than the Bitcoin ledger itself.
In this article, we will explore some select on-chain metrics that provide insight into the sentiment and macro-spending patterns of hodlers, speculators and miners. The objective is to equip readers with the tools needed to appreciate the progress and data patterns as they relate to the current bull market.
In bear markets, interest in Bitcoin the protocol typically wanes, and by the end of it, only Bitcoiners, smart money and miners remain standing. These are the buyers of last resort, and they all have one goal: to accumulate as much bitcoin as possible before everyone else works it out.
For on-chain data, the patterns and fractals we observe during bear markets are largely driven by these low time preference accumulators. The chart below shows supply accumulation by long-term holders and how it consistently peaks during the darkest times.
Bull markets on…