Positive signs of Bitcoin’s recovery can be found in on-chain data, spot exchange and futures data.
Bitcoin
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had a rough time throughout 2022.
But current on-chain and futures market data show positive signs that the leading cryptocurrency by market capitalization is starting to recover.
After a brief pause, the futures market shows a new balance. According to Glassnode data, liquidations of short positions removed unhealthy market speculators, on-chain and exchange data now show that net market and exchange flows are improving.
Now, a large group of previously loss-making investors are falling back into the category of what Glassnode analysts call “unrealized gains.”
Extended short breaks provided the basis for new investors to succeed
Futures data tends to maintain a balance between longs and shorts. As the market moves, investors often restructure their futures to avoid liquidation. Conversely, in mid-January, disgruntled investors were caught, resulting in an all-time high of 85% short resignations.
The dominance of short settlement has contributed to Bitcoin’s current rally. In January, more than $495 million was spent on short-term futures. Liquidated shorts cause the automatic purchase of Bitcoin, thereby increasing the price of BTC. So far, suspensions have had three major waves that reached $165 million in a single day of suspensions.
After historically short settlement rates, the futures market is trending long. On January 10, at 30 years, 51.46% of open interest is long, not short.
The destruction of the shorts not only helped boost the price of Bitcoin, but also seems to indicate a return of positive sentiment in the BTC market.
Glassnode analysts said:
“For both permanent swaps and calendar futures, the cash and carry basis are now back in positive territory, yielding 7.3% and 3.3% annually, respectively. This comes after November and most of December saw a reversal in futures markets, indicating a return to positive sentiment, possibly with an element of speculation.”
Net flow of centralized exchange ten balances
In March 2020, Centralized Exchange (CEX) Bitcoin balances reached an all-time high. Bitcoin has since left the spot exchanges. Currently, there are about 2.25 million BTC on the top 21 exchanges, which is a multi-year low. 11.7% of the total Bitcoin supply held on centralized exchanges was last verified in February 2018.
Generally, throughout Bitcoin’s history, exchange inputs and outputs are equal, creating an even balance. That balance was upset in November when Bitcoin on exchanges reached between $200 and $300 million a day. The biggest move this time was historic, removing 200,000 Bitcoin from exchanges during the month.
Although Bitcoin began to gain bullish momentum in January, centralized inflow and outflow of exchange has become normalized. Current flows are close to neutral, with reduced maximum flows.
Many groups of Bitcoin investors are returning to the “uncertain profit” zone.
The movement of Bitcoin in and out of exchanges helps analysts get estimates of the purchase price of BTC from investors. In the 2022 bear market, only pre-2017 investors had potential returns. Investors who got into Bitcoin after 2018 had unrealized losses.
According to Glassnode analysts:
“With 2022 trending down, only investors from 2017 and earlier avoided having a net unrealized loss, and the 2018+ class saw their debt basis wiped out by FTX’s red candle .But the current conference has pushed the 2019 class ($21.8K) and earlier into unrealized gains.
The fact that a growing number of investor groups have returned to profitability is a good sign, especially after Bitcoin witnessed heavy losses in December.
The two largest groups of investors, those who bought BTC on Coinbase and Binance, hold BTC with an average value of $21,000. As Bitcoin continues to struggle to reach $24,000, any impending correction by larger factors could see the category’s unprecedented gains slide.
Positive signs of Bitcoin price recovery can be found in on-chain data, spot exchange and futures data. Futures market shows new balance after near-term record spending.
