06.12.2021

Network metrics indicate completion of correction and trend reversal for bitcoin

Morgan Creek Digital co-founder Anthony Pompliano believes on-net metrics indicate that Bitcoin’s correction from a record high of $ 64,863 below $ 50,000 is nearing completion.

In the new episode of The Pomp Letter, the bitcoin defender used data from network analyst Will Clemente to explain his bullish stance on BTC amid a market correction.

Pompliano estimated the funding rates, which he said turned optimistic as the pullback liquidated over a million crypto trader accounts and got rid of greed and leverage.

“Funding rates are used to tie the perpetual swap contract to the bitcoin spot price. When most traders go long, it is profitable to go short, and vice versa. Now the funding rates have changed in the negative direction, which means that it has become more profitable for traders to open longs. This should be considered a signal to buy. “

Pompliano also stressed that the profit ratio (SOPR), an indicator that measures the net profit or loss of market participants, is beginning to approach the level at which buyers usually come.

“Historically, any falls below 1 have been a great buying opportunity. During the January correction, the SOPR was reset to just above 1, and the February correction of the SOPR went below 1. The SOPR is now approaching the full reset, which means that the price has either reached or is very close to reaching the bottom of the current correction. ”

Another network metric that Pompliano is monitoring is the net position of miners, which currently indicates that miners are heavily accumulating bitcoins in the midst of the fall.

“Accumulation by miners has clearly become a trend in recent weeks. This indicates two things: miners expect higher prices, and they can also cover their CAPEX (capital costs) without dumping coins into the market. ”

Pompliano added that miners can now borrow against their BTC assets using Decentralized Finance (DeFi) lending protocols, allowing them to pay for their day to day expenses.

Pompliano is also monitoring the growth in the number of bitcoin wallets containing between 100 and 1,000 BTC, and he says that number has skyrocketed this year.

“The pink line, addresses from 0.1-1 BTC, has been steadily climbing for a couple of years. However, the green line, addresses with a balance of 100-1000 BTC, shot up during 2021. These wallets indicate that wealthy people and new organizations are entering the blockchain industry and are occupying significant positions. “

In general, the expert is convinced that the indicators on the network hint at the next BTC reversal.

“In conclusion, in the short and medium term we are approaching the bottom of the current correction and are just waiting for the end of the profit taking and the transition of coins from weak to strong hands.”

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