So we're bullish again?

On-chain update 26th March 2021

I’m going to start using Pro Charts from CryptoQuant so that we can get used to looking at them and also it enables me to condense multiple charts into one.

For example, we’re going to start using the Reserves Chart, which shows exchange reserves of BTC and Stablecoins. Previously we’ve been looking at these on separate charts.

We just had the quarterly options on Deribit expire freeing up $6bn in capital that can now flow freely again, and flowing it is.

Or as Yoda would say… Capital flowing freely it is.

Reserves Chart

View the chart on your own CryptoQuant account here.

Feedback on the chart is encouraged in the comments, anything ranging from the format and colours (if it’s easy or hard to read) as well as your thoughts on what this means for the market or how you’re going to incorporate it into your trading strategy.

That is how this should be used by the way, there are some on Twitter ehem, @loomdart, looking at you, who think that on-chain data is useless, a scam, a fad, noise, or at the very least not the $10k that Jarvis Labs are charging for a lifetime subscription. Yeah, lifetime. (where’s that sarcastic raised eyebrow emoji from MSN when you need it…).

It’s an extra tool that you can use alongside TA, FA, Social Sentiment etc. to inform your trading decisions. And they are your decisions, this is not financial advice.

We actually found support at $50.5k ahead of the expiry time and price had already started to rise. It’s continuing to rise whilst BTC reserves on exchanges drops and Stablecoin reserves is closer to vertical than horizontal now.

These are the bullish signs we are looking for, based on this data alone it’s the exact setup we want for price to move higher.

The market is showing it’s hand early, but that doesn’t mean we won’t dip slightly lower before we go up. Derivatives can and always will be used by big players to move the market into areas of high liquidity. That’s why most get rekt all the time on leverage trading and why when there is a dip, it always seems to tap your stop loss or your liquidation price. It’s almost like they know where your liquidation price is! News flash, they do.

Institutional Buying Pressure

The next chart that’s going to make it on the regular is the one that tells us about the current institutional buying pressure and how many OTC deals we think are taking place right now.

To do this I’m going to use a popular technique of combining BTC Tokens Transferred on the network and BTC Fund Flow Ratio.

Since OTC deals don’t appear on exchange order books, we need to look at the total number of tokens transferred on the network to get an idea of how much Bitcoin is moving around.

It’s useful when we combine it with the Fund Flow Ratio. Fund Flow Ratio tells us what ratio of the transactions on the network involve exchanges.

When Tokens Transferred is going up but Fund Flow Ratio is going down it suggests there are more OTC deals happening.

View the chart on your own CryptoQuant account here.

This view is quite zoomed out because I want you to see that, in August 2020 Fund Flow Ratio decreased dramatically and Tokens Transferred increased dramatically. We believe institutional buying pressure increased and as you can see there is a strong correlation with price increase.

Now I’d like to focus in on what’s been happening recently, you can see that Tokens Transferred has been in a slump and Fund Flow Ratio has been up. During March I think that institutional buying has slowed.

Except in the past couple of days when tokens transferred has gone up. Institutions have been buying every dip and it’s reflected in this chart.

Summary

I’m going to leave it there, it’s been a long week and I’m also trying to keep these posts short and snappy. There’s a lot going on right now and a Grayscale unlocking ahead. For now, things are looking bullish again.