The Return of the Speculators 

Dear subscribers,
Welcome to the October 9, 2021 report.

My last letter written when BTC was at $41.2k outlined an expectation of price action inside the range of $39k-$47k. Instead, price rallied as high as $55k on strong speculative buying on exchanges. This was against a backdrop of relatively mild activity by investors seen on-chain. Regardless, the net effect is that the moderate discount between price and the fundamental demand and supply we saw between investors has now been closed.
Top level summary for 9th Oct 2021 (current price $54.6k):
> Macro: Long term accumulation is at peak levels, structurally this points to a strong rally starting in upcoming months and a bull market well into 2022. The weeks ahead are a good time to accumulate.
> Mid-macro: Whales are mildly accumulating. Buying from strong holders has reverted back to neutral. Structurally it points to a multi-month sideways to bullish re-accumulation phase, though this could change quickly.
> Short term: The latest price rally has brought price into alignment with on-chain demand and supply. There’s some profit taking from speculative investors while the buying from strong hands remains neutral. The overall picture is neutral with not a lot of signal coming from on-chain data.
> Speculation: Speculation is climbing on derivative exchanges. This is during a time where an ETF approval by the SEC may come soon as soon as the next 3 weeks. The speculation around this event will easily outweigh the impacts of short term on-chain demand and supply (which is quite neutral at this time).
> Price action expectation: Sideways bearish consolidation inside $48k-$58k over the next 2 weeks. This is on the basis of on-chain and technical analysis. If an ETF is approved, all bets are off, price goes bullish.
Price action conviction: Low. It’s a time of increasing speculation around an ETF approval while on-chain signals remain neutral.
All the best until the next letter.

Moving forward, I will be using this BTC chart (above) with many indicators to assess how BTC is tracking against these tools. We have also added another page with a listed toolset outside these reports to also see how BTC is tracking. These won’t be included in the reports but just reference material which could be included from time to time

Analysis Breakdown

Macro: Peak accumulation by long term holders

Long term holders are now well into peak levels of accumulation. Judging from past behavior, we have perhaps two or more months before the resulting supply shock takes hold and forces price into a multi-month rally. Thus structurally the market is set to continue its bull market well into Q1 2022 and beyond.

SUMMARY: MACRO Bullish into Q1 2022

Long Term Holder Supply Shock tracks coins that have aged in their wallets for more than 5 months as a ratio to the remaining coins that are more active. 5 months is the threshold where the probability of coins moving (being sold) starts dropping away.

Mid-Macro: Strong hands are neutral

The chart below tracks the 90 day sum of coins moving to and away from investors that have a strong tendency to accumulate and hold. I like this visualization as an indication of mid-term demand from investors. We are currently in a neutral area, neither bullish or bearish.

SUMMARY: MID MACRO Neutral / sideways

90 day sum of coins moving to investors that have a history of buying without much selling. This metric uses on-chain forensics and is subject to drift for more recent data. The solid line corrects for the drift while the dotted line is the raw values.

Mid-Macro: Whales are mildly accumulating

We can use the buying habits of whales as another mid-macro view. They tend to sell down over the long arc of time, but there are zones where they take the opportunity to buy, these periods tend to signal bullishness in the months ahead.
Below is an oscillator view of this activity to help visualise the strength of buying against their normal backdrop of selling. Presently whales are in a neutral to mild zone of accumulation

Short Term: Investor activity has been neutral

Below is the heatmap showing the daily buying or selling by investors. We can see the activity has been mainly neutral but this latest rally addresses the imbalance that opened up when investors bought strongly in September but price slumped
The chart below gives another view of this data. Most of the buying happened in September. It took until October to respond with a rally..
From our Supply Shock chart below, we can see that speculative investors have been taking some profit while investors who are undergoing long term accumulation have remained neutral.
Using our Supply Shock look-back model to establish a fair valuation from short term demand and supply seen on-chain we can see that price is roughly in the correct zone.

A Bitcoin ETF may just be around the corner

While not quantitative on-chain analysis, I want to make mention that there are a number of ETF filings that may get approval by the SEC in the coming 3 weeks. Should any of these get approval, we can expect an immediate speculative rally.
Below are the potential approval dates:
> Oct 18th – ProShares Bitcoin Strategy ETF
> Oct 19th – Invesco Bitcoin Strategy ETF
> Oct 25th – VanEck Bitcoin Strategy ETF
> Oct 25th – Calkyrie Bitcoin Strategy ETF

This BTC chart is post report and goes to validate if this report conclusion was accurate. Note the vertical line, is based on the date of this report

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