Bitcoin News

Bitcoin On-Chain Data and BTC’s Recent Price Rally Point to a Healthier Ecosystem

On-chain, spot exchange, and futures data show evidence of Bitcoin’s revival.

Throughout 2022, Bitcoin had a difficult time.

However, new on-chain and futures market statistics reveal that the largest cryptocurrency by market capitalization has begun to rebound.

Following a series of short liquidations, the futures market indicates a return to equilibrium. In addition, shorting to Glassnode data, quick position liquidations cleaned out unhealthy market speculators, and on-chain and exchange data now show better spot market and exchange net flows.

A considerable number of investors who were previously losing money are now back in the category of “unrealized earnings,” according to Glassnode experts.

Futures data is generally balanced between longs and shorts. This is because investors tend to update their futures contracts as the market changes to prevent liquidation. In contrast, investors were taken off guard in mid-January, resulting in an all-time high of 85% short liquidations.

The prevalence of short liquidation has aided the current Bitcoin rise. Over $495 million in short futures contracts were liquidated in January. Liquidated shorts cause automated Bitcoin purchases, driving up the price of BTC. The year-to-date liquidations contain three big waves, with one day of liquidations reaching $165 million.

The futures market is leaning toward longs after a significant volume of short liquidations. On January 30, 51.46% of available positions were long rather than sharp.

The liquidation of short positions not only aided the Bitcoin price rebound but also appears to indicate a restoration of a bullish attitude in the BTC market.

According to Glassnode researchers:

“Across both perpetual swaps and calendar futures, the cash and carry basis is now back into positive territory, yielding 7.3% and 3.3% annualized, respectively. This comes after much of November and December saw backwardation across all futures markets, and suggests a return of positive sentiment, and perhaps with a side of speculation.”

Bitcoin holdings on controlled exchanges (CEX) hit an all-time high in March 2020. Bitcoin has since flowed out of spot markets. A multi-year low of about 2.25 million BTC is now held across the 21 largest exchanges. The last time 11.7% of the total Bitcoin supply was kept on centralized exchanges was in February 2018.

Throughout Bitcoin’s existence, exchange inflows and outflows have been comparable, resulting in an equitable balance. However, this equilibrium was thrown off balance in November when net bitcoin withdrawals from exchanges hit $200 million to $300 million daily. In addition, the enormous outflow during this era was unprecedented, with 200,000 bitcoins departing discussions over the month.

Since Bitcoin began to gather bullish momentum in January, centralized exchange inflow and outflow have become more typical. The net flows are currently approaching neutral, with a decrease in the strong outflow tendency.

The movement of Bitcoin in and out of exchanges provides experts with an estimate of the BTC acquisition price for investors. Only investors who bought before 2017 might benefit during the lousy market of 2022. Investors who came to Bitcoin after 2018 were all at a loss.

Glassnode researchers claim that:

“Through the 2022 downtrend, only those investors from 2017 and earlier avoided hitting a net unrealized loss, with the class of 2018+ seeing their cost basis taken out by the FTX red candle. The current rally however has pushed the class of 2019 ($21.8k) and earlier back into an unrealized profit.”

The fact that a rising number of investor cohorts have returned to profitability is encouraging, particularly after Bitcoin experienced record realized losses in December.

The average BTC acquisition price for two major investor groups, those who acquired BTC via Coinbase and Binance, is $21,000. As Bitcoin attempts to hit $24,000, any future fall driven by macro causes may reduce unrealized profits in these sectors.

On-chain, spot market, and futures data show hints of Bitcoin’s price rebound. Following a record-high amount of short liquidations, the futures market has returned to balance.

The market is experiencing improved exchange net flows, and spot market activity shows that investors are gradually re-entering the crypto sector.


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