In-depth interpretation: Is the current price range the "launching pad" for the main upward trend of this cycle?
The chips in the low zone do not want to sell, while the chips in the high zone are reluctant to cut losses. The on-chain chip interval structure is quietly forming.Author: Murphy
Preface
Since I finished the article "Discovering the Intrinsic Operating Rules of BTC with a 'God's Eye View'" in February this year, I haven't written any long tweets. On one hand, I feel that if I can explain simple logic clearly, there's no need for lengthy discussions that increase reader fatigue. On the other hand, my busy work schedule has made it difficult for me to focus on thinking through a complete data system. Especially since I prefer to express my articles with a combination of text and images; sometimes the time spent on drawing even exceeds the time spent on writing.
Recently, I've frequently received private messages from friends urging me to share my views on the current stage of the bull market, supported by on-chain data. In fact, many excellent data analysts have already provided analyses on this, such as Ni Da @PhyrexNi in his article on June 11, where he discussed the most authentic data fundamentals in relation to macro events, on-chain structure, and exchange inventory. The link is as follows: https://x.com/PhyrexNi/status/1800210944188190983…
However, I still hope to express some personal views from a different perspective than what is commonly seen, using a multi-faceted approach. After much contemplation and two days of writing, drawing, annotating, and proofreading in my spare time, I have finally completed this nearly 3,500-word piece. If you are a BTC holder or a trend trader, I believe that after reading the full text, it will provide you with some different references and ideas.
Without further ado, let's get to the main topic…
Main Text
The URPD on-chain chip structure can serve as an extremely important reference for trend judgment. It differs from the conventional technical theories we use, such as candlesticks, volume-price analysis, and moving averages, and instead observes who is buying (purchase intention) and who is selling (selling risk) through the formation of dense areas created by the movement of on-chain chips, in order to predict the probability of which direction the market might move next.
A chip dense area formed through long-term turnover often serves as the "launching pad" for the next stage. The thicker the chip structure (the more substantial it is), and the wider the price range (the broader it is), the greater the probability of upward development. "Thickness" indicates strong purchase intention in this range, capable of absorbing chips distributed from other low-cost areas, and due to high expectations for the future, the selling risk generated during price fluctuations will also be lower. "Width" indicates good chip dispersion, preventing concentrated selling pressure. As long as there are no sudden black swan events, the chip dense area will create "resistance and stickiness" for the price, meaning it is not very sensitive to price changes and is not easily breached.
Looking at this cycle, there are two impressive "launching pads":
A. $25,000 - $30,000 range;
B. $41,000 - $44,000.
The formation of range A took 220 days from March 2023 to October 2023; the formation of range B took 67 days from December 2023 to February 2024. Therefore, we can see that the formation of a thick price range must occur over a period of "months," during which both bulls and bears must experience intense confrontations before a consensus on the "bottom" can be reached.
The following image shows the URPD data as of October 15, 2023. After 220 days of turnover, a total of 467,000 BTC accumulated in the $25,000 - $30,000 range, accounting for 24% of the total circulating supply of #BTC at that time. This can be considered an extremely exaggerated volume-level data, where almost all selling risks have been released, making the subsequent "launch" a natural progression.
By January 6, 2024, just before the approval of the spot ETF, BTC formed an accumulation of 200,000 BTC in the $41,000 - $44,000 range after 67 days of turnover. Among these, 169,000 BTC came from range A (i.e., the $25,000 - $30,000 range). This is a process of exchanging low-priced chips for high-priced ones, allowing short-term chips benefiting from the ETF's positive expectations to exit early.
At the same time, there are still 298,000 chips in range A held by firm believers. This is also why, after the ETF approval, BTC retraced from $46,000 to $38,000 but did not continue to fall back to range A. The active chips are almost all in these two ranges; the chips in the low range do not want to sell, and the chips in the high range do not want to cut losses, naturally creating conditions for another launch.
Currently, the on-chain chip structure is quietly forming range C!
This is a large range from $60,000 to $70,000, which includes two smaller ranges, namely $60,000 - $64,000 and $66,000 - $70,000. For convenience, we will refer to them as ranges C1 and C2.
As of June 11, range C1 has accumulated 108,000 chips, and range C2 has accumulated 189,000 chips (please ignore the chip movement from Mt. Gox here). Among these, 103,000 came from range A, and 97,000 came from range B. In terms of time span, this process has taken 104 days (the condition of "months" has been met).
If you ask me how much longer it needs to accumulate, I don't know. However, based on previous data, theoretically, as a "launching pad," it should not require a price span as wide as $10,000 (a $5,000 range would suffice). Therefore, both C1 and C2 could potentially become the bottom ranges for future consensus formation. If it is C1, then we need to wait for the chips in C2 to be gradually digested and slowly transferred to C1 to continue forming a more solid range structure. Alternatively, a new accumulation area could form between C1 and C2.
Of course, this alone is not enough…
To become the "launching pad" for the next stage, another important condition must be met, namely the previously mentioned "the chips in the low range do not want to sell, and the chips in the high range do not want to cut losses." We can look at several other data sets to see if the current situation meets this condition.
1. Has the Selling Risk Been Released?
Using the realized profit and loss data chart, we can clearly see the total amount of realized profit and realized loss of BTC each day. By examining their relative scale, we can better understand the market cycle and investor sentiment.
During a bull market, realized profits (RP, green bars) often dominate, as low-cost chips continuously enter and realize profits with the market's strength. Conversely, realized losses (RL, red bars) tend to dominate during bear markets, as BTC purchased at high prices exits at a loss, especially peaking during market capitulation events (i.e., bear market bottoms).
In the previous bull market's peak phase, from January 9, 2021, to April 20, 2021, RP values repeatedly surged. This indicates that as prices rose, a large number of low-cost chips realized profits multiple times, creating significant selling pressure in the market. If subsequent funds cannot absorb this pressure, it will lead to a gradual increase in RL values (red bars), ultimately completing the transition between bull and bear cycles.
In this cycle, from March 5, 2024, to March 18, 2024, there was also a surge in RP values, and its scale was comparable to that of the previous bull market peak phase. However, unlike before, after this concentrated profit realization, there has not been a sustained appearance of RP peaks (the RP peak on May 28, 2024, was caused by the movement of ancient chips from Mt. Gox, which we can ignore). Therefore, we can conclude that the current market sentiment is relatively stable, and the profit realization on March 18, 2024, represents a release of selling risk rather than a peak in the bull market.
We can also observe from another angle, namely the buyer momentum/seller pressure data of mainstream assets on exchanges.
It assumes a simple model: inflows of BTC + ETH into exchanges (measured in USD) are considered selling pressure; inflows of stablecoins are viewed as buying momentum. Negative red values indicate selling pressure, where the inflow of stablecoins is less than the inflow of BTC + ETH selling. Positive green values indicate buying momentum, where the inflow of stablecoins exceeds the inflow of BTC + ETH selling.
From the above chart, we can see that during the period from January 8, 2021, to May 10, 2024, the selling pressure on exchanges remained high, and it suddenly amplified as prices began to weaken (the May 19 event), signaling the peak of the bull market. In this cycle, as prices continued to rise, selling pressure peaked on March 13, 2024, but did not sustain high levels afterward; instead, it quickly weakened. Combined with the analysis conclusion of exchange flow momentum from the previous tweet, both #BTC and #ETH are currently in a low liquidity state on exchanges.
By combining these data points, we can conclude that the current market meets the condition of "the chips in the low range do not want to sell."
2. Have Short-Term High-Price Chips Sold at a Loss?
We introduce the Bitcoin seller risk ratio as a risk management tool to assess market risk. The calculation method of this model is to sum all realized profits and losses on-chain and then divide by the realized market value. Therefore, its essence is to compare the total dollar value spent by investors each day with the total realized market value.
When the value approaches the lower red line (low value), it indicates that most #BTC is being sold at prices relatively close to the cost, and the market has reached a certain level of balance. This situation also indicates that the "profits and losses" within the current price range have been exhausted, and the market is in a low volatility environment.
When the value approaches the lower blue line (high value), it indicates that investors are selling #BTC at relatively high profits or losses compared to their cost basis. This situation may require the market to find balance again, usually accompanied by high volatility in price movements.
From the chart, the appearance of high risk ratios often occurs during bull market surges or bear market crashes, where investors either realize high profits or cut losses. In the early stages of both bear and bull markets, the frequency of low risk ratios indicates that high-cost investors are unwilling to sell at a loss, and most of the BTC sold are short-term chips close to the cost price. This is also a period of market balance in a low volatility environment. For example, the current situation is similar.
As the bull market progresses, the risk ratio gradually rises, indicating that selling risk in the market is increasing. By the late bull market stage, it is almost impossible for the risk ratio to fall below the red line.
Through this data observation, we can draw another conclusion that the current market also meets the condition of "the chips in the high range do not want to cut losses."
Conclusion
Thus, the entire data reasoning logic has been fully explained. I believe that the current price range has a high probability of being the "launching pad" before the main uptrend of this cycle, and this conclusion is based on the current data foundation. However, data can change, so we cannot guarantee that future situations will align 100% with this analysis.
So, could it be that we are currently at the peak stage of the bull market? If such a possibility exists, the following conditions must be met:
A large number of low-range chips exit in the high range, especially the chips formed in ranges A and B during this cycle, which were not bought at the bear market bottom, inevitably leading to some unwilling to ride the roller coaster of another cycle.
RP peaks appear multiple times, and the peaks are getting lower, while RL begins to gradually increase.
Selling pressure on exchanges remains high, and the flow momentum of exchanges begins to amplify.
The seller risk ratio shows consecutive high values, with high points gradually declining.
A black swan event occurs, severely deviating from market expectations.
The more of these conditions that are met, the more likely it is that we are at the peak stage of the bull market.
What I have described is a methodology based on evidence that can form a closed loop; do not regard it as a prediction of market direction or price. These models combine my long-term observations and tracking of data, as well as the accumulation of experience, and are one of the most intuitive and effective methods for judging bull market tops. If friends also agree, they can use this as a reference, think deeply, and draw their own conclusions.
