{"uuid":"aa92d8b2-524a-44f2-6586-78560e22bbee","categoryUuid":"d2f73d80-57d3-4036-70f0-ad43e12c1276","data":{"meta":{"name":"Tracking Market Momentum"},"configs":[{"meta":{"content":"# Tracking Market Momentum with On-chain Data\n\n---\n\n📰 [**Read the full report here**](https://insights.glassnode.com/the-week-onchain-week-06-2024/)\n\nOn-chain data allows for a remarkable level of transparency about the performance of digital assets, often to a degree that is uncommon for traditional financial assets. A benefit of this transparency is that it allows for analysts and investors to monitor market trends and momentum through a very wide range of metrics and indicators.\n\nIn this Dashboard, we will explore how on-chain data can be used to identify inflection points, and sustained periods of positive market momentum for Bitcoin. We will explore this concept through the lens of four on-chain analysis categories:\n\n- 🟢 **Market Activity**: Using network activity and adoption to identify periods of growth.\n- 🔵 **Market Profitability:** Identifying periods where investor unrealized profit is increasing.\n- 🔴 **Spending Behavior:** Spotting periods when long-term investors commence heavy distribution.\n- 🟠 **Wealth Distribution:** Considering the balance and transfer of wealth between old and new holders.\n\n---\n\n## Conditions\n\n---\n\nThis chart will turn light blue when **4-of-8** indicators are triggered singalling positive momentum, and dark blue when more than **7-of-8** are triggered, signalling a topping formation. Conversely, the chart will turn orange when less than **2-of-8** signals are active, signalling negative momentum.\n\nThe black curve presents the number of triggered indicators (indexed to 8). Each colored bar is associated with a concept listed above and will activate when both input conditions are.\n"},"uuid":"488adb0c-c9f1-4478-a919-19a27ad3ac6e","extra":{"backgroundColor":"#ffffff"},"configType":"content"},{"meta":{"refUuid":"0bdcf94b-af0e-43bc-747d-a9429e74eaab"},"uuid":"d5895cb0-e1e7-4b1f-a481-fa83c4487a83","extra":{"zoom":"5y"},"configType":"workbench"},{"meta":{"refUuid":"4ffd0147-a339-4de8-7a59-877af166b3c2"},"uuid":"583ee718-37ea-4024-8b9c-bd877b85e448","configType":"workbench"},{"meta":{"content":"## On-Chain Activity and Adoption\n\n---\n\nIncreasing usage of the Bitcoin network is a typical characteristic during periods of growth, where the user-base expands, network activity increases, and price tends to appreciate. As such, we can identify periods of positive momentum via metrics describing an uptick in on-chain activity.\n\n---\n\n## Fee Revenue Momentum:\n\n- Base Metric: Miner Revenue From Fees\n- Transformation: 2yr Rolling Z-Score\n- 🟩 Positive Momentum: Z-Score \u003e 0\n\n## Exchange Inflow Momentum:\n\n- Base Metric: Exchange Inflow Volume [USD]\n- Transformation: 30D-SMA and 365D-SMA cross-over\n- 🟩 Positive Momentum: 30D-SMA \u003e 365D-SMA"},"uuid":"af5541d9-e492-4af7-90c2-1086b63b564c","extra":{"backgroundColor":"#ffffff"},"configType":"content"},{"meta":{"refUuid":"329ba9fc-8eb7-4f5a-4737-0601f212dd2a"},"uuid":"30683efd-b1db-4771-94fb-3bed6a9dc6ae","extra":{"zoom":"5y"},"configType":"workbench"},{"meta":{"content":"## Unrealized Profit and Pricing\n\n---\n\nA primary advantage of on-chain analysis is the ability to monitor the cost basis of each coin considering the pricestamp at which it last transacted. We can use this toolkit of Unrealized Profit/Loss to identify price zones where a large volume of the supply has changed hands.\n\n---\n\n## Supply in Profit Momentum:\n\n- Base Metric: Supply in Profit [BTC]\n- Transformation: 30-day Difference of Supply in Profit (90D-EMA)\n- 🟩 Positive Momentum: Supply In Profit (90D-EMA) increases over last 30-days.\n\n## AVIV Ratio Momentum:\n\n- Base Metric: AVIV Ratio\n- Transformation: 365D-SMA\n- 🟩 Positive Momentum: AVIV Ratio \u003e 365D-SMA\n\n## Short-Term Holder MVRV Momentum:\n\n- Base Metric: Short-Term Holder MVRV Ratio\n- Transformation: STH-MVRV - 1\n- 🟩 Positive Momentum: (STH-MVRV - 1) \u003e 0"},"uuid":"3f967e26-b322-4d79-a995-30f128c31492","extra":{"backgroundColor":"#ffffff"},"configType":"content"},{"meta":{"refUuid":"aac9ae20-2ebc-4610-7941-b7e26639ebc7"},"uuid":"31ce28e5-4f79-44b8-8828-5c078ea48f35","extra":{"zoom":"5y"},"configType":"workbench"},{"meta":{"refUuid":"10b8fd57-d8cd-465c-5bba-9c63414ef78d"},"uuid":"108f59e5-46b8-4092-98f3-6ffbb265020d","configType":"workbench"},{"meta":{"refUuid":"84e0ba0a-2ad0-4237-4fb8-902309f6dd12"},"uuid":"026cf242-367b-4e90-af48-d433118e94f8","configType":"workbench"},{"meta":{"content":"# Spending Activity\n\n---\n\nIn the previous section, we assessed the unrealized profit/loss incentives which drive market participants to make decisions. These observations are well paired with metrics that describe whether investors took action in response to these incentives. Thus, the next logical step is to evaluate the realized market response to these pressures.\n\n---\n\n## SOPR Momentum (Entity-Adjusted):\n\n- Base Metric: Entity-Adjusted SOPR\n- Transformation: 30D-SMA and 365D-SMA\n- 🟩 Positive Momentum: 30D-SMA \u003e 365D-SMA\n\n## Realized Profit/Loss Ratio Momentum:\n\n- Base Metrics: Realized Profit / Realized Loss Ratio (Entity-Adjusted)\n- Transformation: 30D-SMA and 365D-SMA\n- 🟩 Positive Momentum: 30D-SMA \u003e 365D-SMA"},"uuid":"249487af-4b01-41d0-86e3-33964fb04bb1","extra":{"backgroundColor":"#ffffff"},"configType":"content"},{"meta":{"refUuid":"28f9830e-3808-405b-5f1e-0aa1ff7d0c3c"},"uuid":"6348a017-371e-43c5-89b0-7703a20f2a4f","extra":{"zoom":"5y"},"configType":"workbench"},{"meta":{"refUuid":"8e5fce43-5169-45e2-731d-b982401064d9"},"uuid":"3802cd10-89da-4987-9a35-4700c4be335a","configType":"workbench"},{"meta":{"content":"# Wealth Transfer\n\n---\n\nThe final charactestric we shall discuss is the transfer of wealth from longer-term investors, to newer and often less experienced investors. Typically, cycle bottoms are distinguished by a disproportionate amount of wealth held by Long-Term Holders. Conversely, cycle tops are often punctuated by a significant saturation by Short-Term Holders.\n\nThe balance of wealth held between these two cohorts can then be used to provide insight into the position of the current cycle.\n\nTo model this phenomena, we shall utilize the SLVR metric, which compares the wealth held by coins aged 24hrs to coins aged 6m-1y. A momentum cross-over of 30days to 150days is used, as originally proposed by the metric author Capriole Investments.\n\n---\n\n## SLRV Ribbons Momentum:\n\n- Base Metrics: Ratio between 24h realized HODL wave and the 6m-1y realized HODL wave (SLRV)\n- Transformation: 30D-SMA and 150D-SMA \n- 🟩 Positive Momentum: 30D-SMA \u003e 150D-SMA\n"},"uuid":"a1ac0825-4bc8-4918-920c-347d9d7f3d67","extra":{"backgroundColor":"#ffffff"},"configType":"content"},{"meta":{"refUuid":"65faab60-7909-4576-610f-d0495326ea29"},"uuid":"d56acb73-b139-4564-831f-3e41f62088a8","configType":"workbench"},{"meta":{"refUuid":"0bdcf94b-af0e-43bc-747d-a9429e74eaab"},"uuid":"6526805d-1646-45ad-8092-7b4ac39c13f9","configType":"workbench"},{"meta":{"content":"### Disclaimer\n---\n\n*This dashboard and associated content does not provide any investment advice. All data is provided for information purposes only. No investment decision shall be based on the information provided here and you are solely responsible for your own investment decisions. For for details, please refer to our [Terms and Conditions](https://studio.glassnode.com/terms-and-conditions).*"},"uuid":"4597d30d-bebb-44f6-b86a-780f2647bd01","extra":{"backgroundColor":"#ffffff"},"configType":"content"},{"meta":{"content":"## Realized Profit/Loss Momentum Indicators\n\n---\n\nThe following presents a series of advanced indicators which are useful for identifying inflection points and shifts in the Bitcoin market regime. This metric was first introduced in [The Week On-chain 347-2023](https://insights.glassnode.com/the-week-onchain-week-34-2023/).\n\n\nThe construction logic of these indicators is as follows:\n\n- During market uptrends, investors progressively realize profits on their coins, and realized losses are relatively infrequent and small in relative magnitude. The opposite is also true for macro downtrends.\n\n- At market inflection points (local and global), many investors find themselves 'trapped' having acquired coins at a now unfavorable / favorable cost basis.\n\n- The regime of Profit (or Loss) dominance often rapidly switches over to a Loss (or Profit) dominated regime around these inflection points.\n\n- As a result, the Realized Profit/Loss ratio on spent coins will accelerate at an exponential rate (e.g. at cycle tops, Realized losses go from negligible to significant in a short span of time).\n\n- The objective of these indicators is to identify when these inflection points are reached across various on-chain cohorts.\n\nThese indicators are available in four types:\n\n1. Long-Term Holders (slower but more stable indicator)\n\n2. Short-Term Holders (faster but more volatile indicator)\n\n3. Entity-Adjusted global market (economically meaningful activity)\n\n4. Global market (all on-chain spending considered)\n\n---\n\n## Indicator Construction\n\nThese metrics take the ratio between the Realized Profit/Loss Ratio, and its 1yr moving average. This tool provides a view of periods where the Profit/Loss Ratio is experiencing acceleration in either direction, aiding in identification of trend inflection points.\n\nRealized Profit/Loss Momentum is calculated as follows:\n\n`Realized P/L Ratio = Realized Profit / Realized Loss`\n\n`P/L Ratio Momentum = sma(Realized P/L Ratio,7)/sma(Realized P/L Ratio,365)`\n\nA dominance oscillator is also provided at the bottom of the chart for another view of inflection points.\n\n---\n\n## Investor Psychology to Consider\n\nThe following general points can help to understand the market mechanics described by these indicators:\n\n- Owners of recently transacted or acquired coins are likely to carry a degree of recency bias with respect to the coins cost basis. Thus price rising, or falling below that level is more likely to elicit a response. As such, Short-Term Holder variants of this tool are the most responsive, but also more volatile.\n\n- Around local market extremes, there is often a net transfer of wealth, as investors take profits near tops, or capitulate near bottoms. This rotation of capital usually leads to an increase in the proportion of wealth held by Short-Term Holders, making them a primary cohort to observe after these events. Long-Term Holders are often most active around market extremes, and less so during trending markets.\n\nThus, tracking the momentum shifts for realized profit/loss can signal when macro market trends are at an inflection point.\n\n- 🟢 Realized Profit accelerates during market rallies, as investors that acquired coins recently come into profit.\n\n- 🔴 Realized Loss accelerates during market corrections, which plunge the investors that recently acquired coins into a loss, creating panic."},"uuid":"bd03e847-43b6-4c10-b3a6-868f9ec9a330","extra":{"backgroundColor":"#ffffff"},"configType":"content"},{"meta":{"refUuid":"257275a2-76a2-4779-461d-ffaf525841b9"},"uuid":"84a59c45-279c-4e03-a256-36d3f0b4fbf8","configType":"workbench"},{"meta":{"refUuid":"381ea32c-b3c9-4d00-7440-19f7dce18d77"},"uuid":"3bf2442c-f434-4f71-ba07-e37e8c6ee779","configType":"workbench"},{"meta":{"refUuid":"593dbbed-df53-45ed-5559-1c7d03942660"},"uuid":"30235a75-9aab-43a2-8a3e-00ca51e302cc","configType":"workbench"},{"meta":{"refUuid":"395ab460-b55d-4cd3-6dff-88dcf40a98a6"},"uuid":"151d5fb8-efa8-443f-81e0-d99f2ad4bf38","configType":"workbench"}],"layouts":[{"h":10,"i":"488adb0c-c9f1-4478-a919-19a27ad3ac6e","w":4,"x":0,"y":0,"minH":1,"minW":3,"moved":false,"static":false},{"h":10,"i":"d5895cb0-e1e7-4b1f-a481-fa83c4487a83","w":8,"x":4,"y":0,"minH":1,"minW":3,"moved":false,"static":false},{"h":8,"i":"583ee718-37ea-4024-8b9c-bd877b85e448","w":8,"x":4,"y":20,"minH":1,"minW":3,"moved":false,"static":false},{"h":8,"i":"af5541d9-e492-4af7-90c2-1086b63b564c","w":4,"x":0,"y":20,"minH":1,"minW":3,"moved":false,"static":false},{"h":8,"i":"30683efd-b1db-4771-94fb-3bed6a9dc6ae","w":12,"x":0,"y":28,"minH":1,"minW":3,"moved":false,"static":false},{"h":10,"i":"3f967e26-b322-4d79-a995-30f128c31492","w":4,"x":0,"y":36,"minH":1,"minW":3,"moved":false,"static":false},{"h":10,"i":"31ce28e5-4f79-44b8-8828-5c078ea48f35","w":8,"x":4,"y":36,"minH":1,"minW":3,"moved":false,"static":false},{"h":8,"i":"108f59e5-46b8-4092-98f3-6ffbb265020d","w":12,"x":0,"y":46,"minH":1,"minW":3,"moved":false,"static":false},{"h":8,"i":"026cf242-367b-4e90-af48-d433118e94f8","w":12,"x":0,"y":54,"minH":1,"minW":3,"moved":false,"static":false},{"h":10,"i":"249487af-4b01-41d0-86e3-33964fb04bb1","w":4,"x":0,"y":62,"minH":1,"minW":3,"moved":false,"static":false},{"h":10,"i":"6348a017-371e-43c5-89b0-7703a20f2a4f","w":8,"x":4,"y":62,"minH":1,"minW":3,"moved":false,"static":false},{"h":10,"i":"3802cd10-89da-4987-9a35-4700c4be335a","w":12,"x":0,"y":72,"minH":1,"minW":3,"moved":false,"static":false},{"h":10,"i":"a1ac0825-4bc8-4918-920c-347d9d7f3d67","w":4,"x":0,"y":82,"minH":1,"minW":3,"moved":false,"static":false},{"h":10,"i":"d56acb73-b139-4564-831f-3e41f62088a8","w":8,"x":4,"y":82,"minH":1,"minW":3,"moved":false,"static":false},{"h":10,"i":"6526805d-1646-45ad-8092-7b4ac39c13f9","w":12,"x":0,"y":10,"minH":1,"minW":3,"moved":false,"static":false},{"h":4,"i":"4597d30d-bebb-44f6-b86a-780f2647bd01","w":12,"x":0,"y":124,"minH":1,"minW":3,"moved":false,"static":false},{"h":8,"i":"bd03e847-43b6-4c10-b3a6-868f9ec9a330","w":4,"x":0,"y":92,"minH":1,"minW":3,"moved":false,"static":false},{"h":8,"i":"84a59c45-279c-4e03-a256-36d3f0b4fbf8","w":8,"x":4,"y":92,"minH":1,"minW":3,"moved":false,"static":false},{"h":8,"i":"3bf2442c-f434-4f71-ba07-e37e8c6ee779","w":12,"x":0,"y":100,"minH":1,"minW":3,"moved":false,"static":false},{"h":8,"i":"30235a75-9aab-43a2-8a3e-00ca51e302cc","w":12,"x":0,"y":108,"minH":1,"minW":3,"moved":false,"static":false},{"h":8,"i":"151d5fb8-efa8-443f-81e0-d99f2ad4bf38","w":12,"x":0,"y":116,"minH":1,"minW":3,"moved":false,"static":false}]}}