Welcome to ZUBR’s blog, a place where we explore the intricacies of the crypto derivatives markets. We analyze the patterns, pitfalls, and possibilities in the form of concise and detailed market research, available to all.
Sharing our findings allows us to explore market weaknesses and loopholes that have been exploited by many. It’s one of our ways of leveling the playing field.
To us, it’s all about fair play. With enough time, resources, and consideration, we believe we can create a competitive environment where people are rewarded for their strategic talent – not their financial backing or technological edge.
The majority of trading venues have settled for compromised solutions. The market needs an ethical entity that is motivated to provide better tools for traders – and doesn’t partake in dubious practices for profit.
Bold claims and empty promises have been popular marketing tools in this space for years. Instead, we choose to continuously evolve our methods and educate ourselves, staying true to our vision of a fairer trading environment – one that will see the crypto markets reach much-needed maturity.
To that end, please see our findings, and please get in touch if you have any questions:
Bitcoin-to-Exchange: Supply Trends Setup Early Stage for Price Direction
Bitcoin’s price swings have long left a label on the cryptocurrency as an asset that is speculative, high-risk and always comes with a buyer-beware warning label. The reality is, however, that Bitcoin’s very underpinning technology of being on a blockchain ledger that records coin movements is, by definition, the transactions of available supply. Bitcoin goes into exchanges, and out of exchanges. Sellers can be very simply recognized by changes in Bitcoin balances sitting on exchanges – perhaps not by name, but as total supply positioned to be traded. The other side of the equation, the buyer, can be currently looked at by keeping an eye on the most popular stablecoin that is used in cryptocurrency exchanges to buy Bitcoin, Tether. The largest stablecoin in the cryptocurrency ecosystem now sits, for the most part, on the Ethereum blockchain. Using Glassnode data, this research takes a look at how traders can use live blockchain analytics to assess the market economics of supply and demand for Bitcoin by analyzing both key cryptocurrencies.
Outside of the strong convictions of avid believers, the price of Bitcoin in the long term will be as good a guess as any. Favorable (or unfavorable) news can affect the cryptocurrency’s outlook. Regulations, exchange hiccups, low supply, and a multitude of factors can result in the large price swings holders have become so accustomed to.
But for active traders, the long-term trend is of significance as it helps mitigate risky positions that might be against set trends. Looking to profit on trades when Bitcoin is going up and down, both sides of the trade, is going to happen by making the best-informed decision. Unlike traditional assets, the blockchain paints a near-live picture of supply and demand. Data from blockchain analytics firms such as Glassnode give traders this advantage having mapped out the complex blockchain ecosystem. Trends can be established.
And of course, pessimists will argue that hindsight is a beautiful thing, as the saying goes. When it comes to blockchain analytics and asset valuations, however, it does help in finding out whether or not such data is actually useful and how investors might be able to take advantage of such information in the event that it is.
The latest Bitcoin price rally fueled the cryptocurrency well above $40,000, more than double its previous all-time high at the end of 2017. And blockchain analytics tell the story. Bitcoin sitting on exchanges dropped by a whopping 600,000 in 2020.
From the time exchange balances peaked during the market crash of 2020, all the way through to the end of the year, deposits of Bitcoin ready for sale dwindled. From Bitcoin’s price bottom seen on ‘Black Thursday’, exchange balances dropped by a massive 20%.
Getting to 2021 All-Time High: Delayed 2020 Supply Shortage Reaction?
Exchange Balance (BTC)
Zoom-In, See Trend: 600k Bitcoin Goes Off Exchanges during 2020
Exchange Balance (BTC)
The Other Side of the Equation
There is, of course, the need to assess the demand side. As Tether remains the dominant stablecoin within the ecosystem used for trading, the cryptocurrency can very well represent potential USDT available and ready to pick up Bitcoin. At the start of 2020, exchanges held a little bit more than 500 million USDT on average. By the end of the year, this had ballooned more than double to an average of 1.3 billion USDT after hitting a huge 2.2 billion in April. Minimum exchange balances for USDT stood at more than double that seen at the start of the year, indicating traders might be taking profits and waiting for more opportunities.
In any case, as far as looking for trends on the blockchain, the writing seems to have been on the wall as to a strong recovery for anyone who was paying attention.
USDT Supply Surges Post Crash, Bitcoin Price Slowly Grows
Average Exchange Balance (Tether)
USDT Minimum Exchange Balance End of 2020 Double Start of Year
Maximum USDT Exchange Balance
Into 2021: Supply Trend Squeeze Intact
Bitcoin’s new all-time high set over $40,000 in January was, by and large, a fundamental supply and demand reality unlike 2017 when the cryptocurrency was driven by a large retail crowd. This makes on-chain analytics a much more reliable and important metric moving forward for traders to assess market conditions.
Although Bitcoin has seen a retreat in price to as much as 25% since its new high in January 2021, Glassnode places exchange balances at their lowest point since mid-2018, shortly before the cryptocurrency reversed from its bear market.
It is important to note that while the Bitcoin reward block was cut in half in mid-2020, miners continued to supply the market in grand style, sending more of the cryptocurrency to exchanges in 2020 than in 2019, keeping the markets supplied the best it can. This indicates real fundamental support of demand even further. But perhaps even miners will become squeezed for new coins further propelling a supply/demand imbalance? Traders best watch for such trends.
Maximum & Minimum Bitcoin Balances on Exchanges
Maximum BTC Exchange Balance
Current Trend-to-Direction Setup
The short to medium trends of supply and demand can be well established using Bitcoin on exchange metrics from a bird’s eye view. A jolt in the reversal of a trend, whether Bitcoin or Tether, results in a fairly reliable indicator of price direction.
Even on a block-by-block level, the data will help traders increase long-term profits and mitigate any major price changes that may be coming. Looking at the most volatile day of 2021 shows that very scenario. In fact, for the overwhelming majority of extreme volatile days, blockchain has early tells.
The setup, despite Bitcoin’s massive swings, is actually a fairly straightforward exercise that traders can utilize. An initial supply increase jolt, followed by a confirmation by more supply moving onto exchanges along with price weakness, will give traders the early signs of price direction.
Largest Price Swing: 11 Jan 2021
BTC Exchange Balance
All-Time-High: 08 Jan 2021
BTC Exchange Balance
Fundamental Advantage
While traditional traders rely on technical analysis (TA) for their trading, the technical side of crypto – the blockchain – is actually a fundamental tool. While the examples above are given as an example, the model found in this research indicates the very same trend setup scenario across all days that might see an increase in volatility.
Important price movements, whether moving towards a high or low for the day, are preceded by a supply jolt on an exchange. Both Bitcoin and Tether are key indicators, and blockchain analytics will give users a very important advantage to see ahead.
The very nature of a digital asset is the ability to track such movement and underlying intentions in real-time. With block times going into the hours during heavy periods and exchanges requiring multiple confirmations to credit trader accounts, this leaves a lot of breathing room for traders to properly assess the potential price action to their benefit.
As the crypto landscape evolves, the importance of integrating robust risk management strategies becomes paramount. Traders must not only analyze market trends but also be prepared for unexpected shifts that can arise from regulatory changes, technological advancements, or macroeconomic events. By combining blockchain analytics with sound risk management practices, traders can better position themselves to navigate the volatile waters of cryptocurrency trading. Embracing a proactive approach allows for quicker adaptations to market conditions, ultimately leading to more informed decisions and enhanced trading performance.