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Bitcoin Friday – On-chain analysis of Bitcoin

Today we will look at Bitcoin again, but from a bit more different perspective than you are probably used to. Today we will look at Bitcoin through the scope of on-chain analysis.

In today's analysis, I will look at 4 basic parameters that must change in order for Bitcoin to grow again and reach new highs. In this article, I will be using the statistics sourced from the Glassnode analytical portal.

1. Hash rate

Hash rate of BTC Figure 1: BTC hash rate

The first parameter is the Hash rate. It has long been known that the Hash rate has a direct effect on the price of Bitcoin. At the moment, however, the Hash rate has fallen sharply due to the fact that miners in China are ceasing their activity at an alarming rate. In order for Bitcoin’s price to rise, albeit slowly but steadily, the difficulty of mining (hash rate) has to increase. Currently, we can see a huge price drop which does not pose a security risk per se but prevents BTC price to go back up.

2.Purchase of Bitcoin by Grayscale

Grayscale flows chart Figure 2: Grayscale BTC purchasing flow

After the halving in May 2020, the rule was that the institution bought more Bitcoins per month than it was actually being mined. However, this ended in February. As you can see, Grayscale has not been purchasing Bitcoin since then. Why? Because the institutions' interest in Bitcoin has declined. What we can see even at this moment is that they are not stocking up on Bitcoin even at the current market price. Grayscale is an important player and in order for Bitcoin’s price to rise, we need big institutions to buy Bitcoin again.

3. Bitcoin on exchanges

Percentage of BTC on exchanges Figure 3: Percentage of BTC on exchanges

Another thing that has changed negatively, is Bitcoins on the stock exchanges. We see that after the COVID pandemic breakout, the volume of bitcoins on exchanges started to decline in large numbers. This means that both “hodlers” and big institutions started withdrawing their bitcoin savings. The fewer Bitcoins on the stock exchanges, the greater the pressure on the purchase price. However, this has also changed with the recent price plunge. In terms of price, we would need Bitcoins to move out of the exchanges again which would cause their shortage there. That is due to the fact that the potential Bitcoin shortage on exchanges would cause institutions to look for other ways of buying Bitcoin which would then push its price up.

4. Active addresses

number of active BTC addresses Figure 4: Number of active BTC addresses

The number of active addresses has also dropped recently. What this indicator shows us is the involvement of traditional retail traders. If the interest in cryptocurrencies is great and new people are coming to the cryptocurrency market, new addresses are also added. However, if the interest in cryptocurrencies is somewhat lukewarm, then no new addresses are being added. This is certainly not a crucial metric, but it certainly helps us to see the bigger picture.


In this article, we have looked at the analysis of Bitcoin from a bit different perspective. We see that something has changed in the on-chain data as well, and the results are not the same. I have also shown you the important metrics that I am tracking and that need to change in order for Bitcoin to start growing again.

Jakub is a crypto trader and founder of Trader 2.0 project, which helps hundreds of traders from central Europe to understand cryptocurrency trading and its challenges. Jakub not o...

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