Weekend Pit-Stop, Refuelled for the next leg

On-chain update 29th March 2021

Over the weekend we saw a massive inflow of Stablecoins into Binance (and this time it wasn’t all Tether!!).

Let’s start with the Reserves Chart for Bitcoin and Stablecoins. FYI for my ETH boys I’m working on a similar chart for Ethereum and will include it in the newsletter on a regular basis. It’s just that Ethereum is behaving differently to Bitcoin. More into that below.

All right, all right, I watched the F1 over the weekend hence the analogy, but it is rather apt.

Reserves Chart

Following the expiry of the $6bn of options on Deribit last Friday, we almost immediately saw huge amounts of Stablecoins delivered to Binance.

You can view this chart in your own CryptoQuant account here.

Stablecoins reserves on exchanges have hit an all time high of $10bn.

Not only have we seen a huge increase in Stablecoin Exchange Reserves but Bitcoin Exchange Reserves has been falling dramatically as traders scoop up more Bitcoin and transfer it off the exchange into cold storage.

We also have a Grayscale unlocking event for Bitcoin this week. As mentioned in previous posts, if you’re not aware of the Grayscale effect, read about it here.

We know that accredited investors and wealthy individuals are price agnostic when it comes to the Grayscale effect because of the GBTC premium. As long as the premium exists then it doesn’t matter what price Bitcoin is because that make guarenteed profit by selling their GBTC shares on the stock market (at a premium), buying more Bitcoin than they had previously, handing that over to Grayscale in return for GBTC shares and wait for the next unlocking. Rinse and repeat.

Recently however, the GBTC premium has been trading negative meaning anyone who buys it has effectively been getting a discount on Bitcoin.

Historically however we have seen the premium decline ahead of an unlocking and then bounce back as soon as the shares are unlocked. Watching closely to see if the same happens again.

Institutional Buying Pressure

This was actually a bit lacklustre over the weekend as we saw Fund Flow remain high but Tokens Transferred decline.

You can view this chart in your own CryptoQuant account here.

We take this to mean that there aren’t as many OTC deals happening right now and usually large OTC deals going on by institutions is very bullish.

It was a weekend though so watching this closely to see how it develops over the coming weeks.

Ethereum

Oh Ethereum…

If we try to apply the same analysis techniques of Exchange Reserves to ETH, we see this:

ETH is just leaving exchanges and has been in huge amounts, for ages.

This is very bullish, so why does price seem to struggle, the potential of Ethereum is enormous.

To answer that we have to understand where the ETH is going. First we have ETH 2.0 Total Value Staked:

It accounts for a huge amount but is plateauing and the decrease in ETH on exchanges was happening way before ETH 2.0 staking was released.

So we head over the Glassnode (sorry Ki) where we can see Percent Supply in Smart Contracts:

This is what is truly going on with ETH in my opinion, and it’s may be obvious to most who are into DeFi. ETH continues to be locked up in the decentralised ecosystem via smart contracts. These are things like liquidity pools on AMMs like Uniswap and collateral on lending platforms like AAVE.

Summary

So that’s enough for today, you can already see that price is starting to rise and with the news from Visa, we may have a “sell the news” situation. We didn’t actually close the BTC CME gap last night like we have the previous 6 times and for me it’s still in play. It’s more unlikely now we may have flipped 56k into support but need a retest to confirm whether it holds.

A lot of traders feeling very confident at the moment, they put on new tyres over the weekend, loaded up on alts and that makes me a little wary as derivative players will be looking for any excuse to liquidate rookie traders to fuel their longs for the next leg.