On-chain Bitcoin sentiment: a new hope, but without the whales

Bitcoin on-chain accumulation report, December 2023

A few years ago we introduced the idea of the on-chain accumulation score for Bitcoin. The goal was to have a metric to capture the market sentiment for Bitcoin based on the on-chain activity.

Now, market sentiment does not always correlate with price action. But it is another piece of the puzzle to look at when you are making your opinion about the state of the market. 

So here is one question, as Bitcoin's fourth halving is approaching what is the on-chain activity telling us about what the market expects?

---

The Ecoinometrics newsletter gives you insights from crypto and macro data to help you make better investment decisions. 

We spend hours every day gathering data, creating metrics and bringing them to life with data visualizations that allow you to quickly get to the heart of things.

We then distill all that knowledge in each issue of the newsletter with less words and more charts so that you get insights, direct to the point, in five minutes or less.

Join more than 21,000 investors here:

Done? Thanks! That’s great! Now let’s dive in.

P.S. Checkout our latest tracker of MicroStrategy Bitcoin holdings at https://www.ecoinometrics.com/microstrategy-bitcoin-holdings-with-charts/.

---

On-chain Bitcoin sentiment: a new hope, but without the whales

Bitcoin is open source, the blockchain is public, the network is permissionless. So there aren’t really insiders the same way there are insiders owning stocks of a public company. 

But the open nature of the blockchain allows you to track which addresses are accumulating and which addresses are distributing coins. Taken in aggregate this can be used as a way of gaiging the sentiment that’s driving Bitcoin’s movements at the most fundamental level.

This is what we do every month in this report and that’s the closest you’ll get from understanding what the Bitcoin insiders are thinking.

The takeaway

Hodlers had doubt about Bitcoin's ability to sustain itself above $30k. But those doubts are gone. The accumulation score is rising from low levels and still far away from getting over heated. Historically that’s a sign of positive trend for Bitcoin's price at a one month time horizon.

However the larger whales aren't participating in this trend. Those whales are the missing link that would propel the accumulation score much higher. 

You would think that the lack of participation from the whales less than six months before the halving is weird. But as it turns out historically there isn't any pre-halving pattern in the market sentiment we can extract from the on-chain data. 

So at this point everything looks normal for this part of the cycle.

The small fish are back but the whales are fading the trend