This on-chain ratio shows that Bitcoin can drop before the final surrender


One of the most used metrics in the chain to determine the performance of Bitcoin is the long-term behavior of its owners. Defined as addresses that have not transferred any BTC in six to twelve months, long-term contract holders often point to the tops and bottoms of the market.

The short-to-long-term realized value ratio (SLRV) looks at behavioral differences between short- and long-term stockholders to detect bear markets. The SLRV ratio shows the percentage of Bitcoin supply that was last moved within 24 hours divided by the percentage that was most recently moved between six and twelve months.

A higher SLRV ratio shows that short-term holders are more active on the network and can often indicate a cycle of hype or that a market top is near. A lower SLRV ratio indicates little activity of short-term holders or that the long-term shareholder base has increased significantly.

Ratio created by Capriol Investmentsa cryptocurrency investment fund, to identify market shifts between risk-allocation and risk-off to Bitcoin.

According to the SLRV ratio, Bitcoin is currently in the pink, having been since June of this year, when it hit a local low of $17,600. The pink area shows the SLRV ratio below 0.04 and historically coincided with the accumulation area of ​​the previous bear markets.

Chart showing Bitcoin’s SLRV ratio from 2011 to 2022 (Source: Glassnode)

In every previous bear market, bitcoin has made a firm bottom in the pink area, indicating an eventual price capitulation before a rebound. However, the data from glass It shows that BTC has not yet reached the bottom of the pink zone. This suggests that it could see a further pullback from its $19,600 level before the eventual capitulation.

A deeper dive into the SLRV ratio reveals that Bitcoin has hit lower highs with each bullish run. This could mean that Bitcoin could see a less severe decline in bull and bear market in the future, with less volatility in between. Aside from providing comfort to long-term investors, a less volatile market can also increase institutional adoption.

To solve some of the issues with the SLRV ratio, Capriole Investments created SLRV bars. SLRV Ribbons is an investment strategy that applies a short-term and long-term moving average to the SLRV ratio to indicate the transition from a risk-free market to a risk-free market.

SLRV bars consist of a 30-day moving average and a 150-day moving average. The 30-day moving average above the 150-day moving average indicates that the market is exiting a period dominated by long-term owner activity.

The periods when long-term holders show the most activity are often associated with areas of accumulation – price bottoms use LTHs to increase their BTC holdings. The activity of the short-term holder tends to increase in the later stages of these areas of accumulation, which indicates the beginning of a new adoption cycle and the beginning of the market recovery.

bitcoin btc slrv strips ratio
Graph showing Bitcoin SLRV bars from 2011 to 2022 (Source: Glassnode)

The SLRV strips show that the market has been mostly risk-free since the Bitcoin mining ban in China in May 2021. The downside trajectory of the SLRV 150-day MA was briefly breached by the initial short-lived bear market rally in 2022 but shows no Reversal signs at the moment.

The lack of a trend reversal on the horizon bolsters more data from the SLRV ratio – Bitcoin could drop further before hitting the bottom.

Posted in: Bitcoin, Research

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