Why the dump? It's dip buying season.

On-chain update 22nd March 2021

Today I learned a lot by watching the interview between Koroush AK and Ki Young Ju (founder of CryptoQuant). If you haven’t seen it I highly encourage you to check it out here.

It was fascinating to hear about how Ki got into this space working with the Korean government to catch criminals by monitoring their money laundering activities on the blockchain. Incredible stuff.

Ki has since founded CryptoQuant, my favourite on-chain analytics platform, to provider traders with access to on-chain analytics so they can make smarter, well-informed trading and investment decisions.

If you’re not signed up for CryptoQuant you should seriously consider it. Your first month is free and their Advanced Plan is only $29 per month and with access to this sort of data, you can easily make that back through trading.

Use my referral link so we both earn credits: https://cryptoquant.com/sign-up?my-friend=jgjpaohx

Exchange Reserves

In the interview, Koroush asked Ki what the most important thing for newcomers to on-chain analytics is to look at and he said supply and demand. Monitoring Bitcoin and Stablecoins flowing on and off exchanges.

If you read back through my posts including the first one: Where is the crypto market going to go next? you should notice that this is exactly what I’m doing. It’s at the core of a on-chain analysis strategy and spending the time to understand these fundamental charts and how the Supply (Bitcoin on Exchanges) vs Demand (Stablecoins on Exchanges) impacts price gives you a framework to support your existing trading strategies like TA, FA and social sentiment.

As I write this, Bitcoin is going through a sell off and currently sitting around $54.5k.

BTC All Exchange Reserves:

Following on from yesterday’s post about Bitcoin leaving derivative exchanges, this is showing even more Bitcoin leaving all exchanges. But where, spot or derivatives?

BTC Derivative Exchange Reserves:

BTC Spot Exchange Reserves:

As you can see, it continues to leave derivative exchange reserves instead of spot.

I conclude this is bullish but it’s dip buying season out there. Bit players may be using derivatives to drive price down and find liquidity where they can buy more BTC and then transfer it off exchange. Just a theory of course.

Stablecoin All Exchange Reserves:

At the same time, exchange reserves of Stablecoins remains level, in line with the spot market. It is still sitting there waiting to be used to buy spot Bitcoin.

The Derivatives Market

Taking a look at the derivatives market using the free data from Bybt.com (yes it’s free, can you believe it!?)

Liquidations

The first thing to mention is that there has been a fairly large amount of liquidations in the last 24 hours. $1.38bn at the time of writing.

Whilst this is no where near the $5bn we have seen on the last major dump, it is significant.

Funding Rates

Funding rates are still low, it would be attractive to open a long position right now if it wasn’t for all the selling!

Summary

Clearly it’s dip buying season out there. Buyers are price sensitive and want cheap Bitcoin, so selling pressure takes over until institutions and their algos step in and scope up BTC as the lowest possible prices.

Strap yourselves in, we still need to get through the Deribit options expiry on Friday 26th March. Try not to get chopped up in the meantime, particularly in the alts.

Either that or have diamond forged hands.