The state of crypto – November 2022

Immediately upon interacting with a blockchain, much data becomes publicly available on a public ledger. Analyzing this data may provide crypto traders and investors with helpful insight into the present state of the market. In “The state of crypto”, we take a look at the most important metrics to observe the market based on transaction and trading activity. Our main focus is the two largest cryptocurrencies Bitcoin and Ethereum, and we divide the metrics into short-term and long-term indicators. You find the report for the last month here.

Short-term

For the past month, there has been a net outflow of Bitcoins and Ether out of exchanges, although more notable for Bitcoin. This indicates that holders more inclined to sell have less Bitcoin and Ether at their disposal to potentially push prices down.

Although Bitcoin witnessed low volatility in October, the cryptocurrency encountered two notable price spikes. At the first spike starting on October 2^nd, the price spike is followed by an equal increase in inflow to exchanges, since the higher price has likely triggered greater sell pressure. Interestingly, although the second price spike starting around October 25^th was greater than the first spike, it is followed by a much smaller increase in exchange inflow. This indicates that these weak holders have already capitulated upon the first price spike, potentially suggesting that there is less resistance going forward for an additional leg upwards for Bitcoin.

Similar to last month, it appears that wallets with a low balance are accumulating both Bitcoins and Ether, whereas wealthy wallets are cutting their portfolio. In terms of Bitcoin, it may more than anything be because Bitcoin miners, who are normally wealthy, are selling newly mined Bitcoins at a faster pace to keep their heads above water. In that plausible case, it contributes to constant selling pressure, instead of the miners keeping the Bitcoins on the book, which they traditionally do in bull markets.