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Research: Bitcoin traders willing to go long but sentiment remains firmly bearish

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Research: Bitcoin traders willing to go long but sentiment remains firmly bearish

Research: Bitcoin traders willing to go long but sentiment remains firmly bearish Samuel Wan · 17 seconds ago · 2 min read

Overall market sentiment remains bearish, but traders are still willing to go long even on minor signs of price recovery.

2 min read

Updated: September 18, 2022 at 10:56 pm

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Cover art/illustration via CryptoSlate

Since bottoming at $17,700 on June 18, Bitcoin has been trading within a relatively tight band, with $25,100 marking the upper limit of this channel.

Although the past week or so saw BTC print six consecutive daily green closes, higher-than-expected CPI inflation data, released on September 13, ended the upward momentum. On that day, BTC swung 13% to the downside to bottom at $19,800.

Price uncertainty is the dominant narrative as macro pressures continue to weigh heavy on the market leader. According to the Options 25 Delta Skew and Options Volume Put/Call Ratio, this has played out as a willingness to go long, even on minor signs of price recovery. However, the overall sentiment is bearish.

Options 25 Delta Skew

The Options 25 Delta Skew metric looks at the ratio of put vs. call options expressed in terms of Implied Volatility (IV). Puts being the right to sell a contract at a specific price and calls being the right to buy.

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For options with a specific expiration date, 25 Delta Skew refers to puts with a delta of -25% and calls with a delta of +25%, netted off to arrive at a data point. In other words, this is a measure of the option’s price sensitivity given a change in the spot Bitcoin price.

The individual periods refer to option contracts expiring 1 week, 1 month, 3 months, and 6 months from now, respectively.

Below 0 indicates calls are pricer than puts. This situation has occurred only six times this year. During Bitcoin’s recent bottoming, traders scrambled for puts and then reverted to calls at the local top.

BTC Price vs. Options Skews (Source: Glassnode.com)

This changeable behavior can be explained by a long, drawn-out bear market prompting traders to react quickly, even on minor indications of price recovery.

In recent weeks, as Bitcoin flitted above and below $20,000, traders have struck for calls, to go long, on four occasions, only for the market to move against them. Consecutive back-to-back calls have not happened since the end of last year.

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Options Volume Put/Call ratio

The Options Volume Put/Call Ratio shows the put volume divided by the call volume traded in options contracts in the last 24 hours. It is used to gauge the general mood of the market.

The chart below shows a heavy skew towards puts, as evidenced by sharp increases in the ratio during instances of price bottoming.

This suggests bearish sentiment is firmly embedded. But similar to the Options 25 Delta Skew data, traders will go long on signs of price recovery.

Bitcoin: Options Volume Put/Call Ration (Source: Glassnode.com)

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Research: Bitcoin Cost Basis metric indicates short-term holder capitulation

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Research: Bitcoin Cost Basis metric indicates short-term holder capitulation

Research: Bitcoin Cost Basis metric indicates short-term holder capitulation Samuel Wan · 1 hour ago · 2 min read

Short-term Bitcoin holders are now, on average, underwater and losing faith.

2 min read

Updated: September 30, 2022 at 1:28 pm

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Cover art/illustration via CryptoSlate

The Bitcoin: Cost Basis metric, also known as the realized price, is split into the long-term holder (LTH) and short-term holder (STH) cohorts.

Cost basis refers to the accumulated fair market value of the cryptocurrency token acquired, plus the profits at the time sold. It is generally used to calculate tax liability by determining whether a profit or loss was made during the holding period.

LTHs are defined as tokens held for longer than 155 days, and STHs as tokens held for 154 days and below.

Bitcoin: Cost Basis metric

Analysts use the LTH/STH ratio to determine bull and bear cycles, thus market bottoms and tops. When the ratio is:

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  • Uptrending: STHs realize losses at a greater rate compared to LTHs. This situation is associated with bear market accumulation.
  • Downtrending: LTHs are spending tokens and transferring them to STHs. This generally occurs during bull market distribution.
  • Trading> 1.0: The cost basis for LTHs is higher than that of STHs, typifying the late stages of bear market capitulation.

Historically, when the ratio is less than 1, a market bottom has been reached. Currently, this is the case as the STH realized price is starting to dip below the LTH realized price, signifying a period of loss of faith by short-term holders.

However, market bottoms can span many months before an uptrend in price is reflected. This situation has occurred on only three other occasions in the past.

Source: Glassnode.com

With the DXY up 6% since the start of September, continuing dollar strength puts further pressure on risk-on markets in the near term.

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Research: Debunking the FUD surrounding Bitcoin transaction fees

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Research: Debunking the FUD surrounding Bitcoin transaction fees

Research: Debunking the FUD surrounding Bitcoin transaction fees Andjela Radmilac · 20 mins ago · 3 min read

Bitcoin transaction fees are the lifeblood of the Bitcoin network and are what secures the network both in the short-term and in the long-term.

3 min read

Updated: September 23, 2022 at 3:44 pm

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Cover art/illustration via CryptoSlate

Bitcoin FUD comes in all shapes and sizes, ranging from unbridled energy consumption to rampant crime.

Since 2017, the World Economic Forum has been warning that Bitcoin will eventually consume more power than the entire world. Governments around the world have been campaigning against Bitcoin mining and warning about its effects on climate change.

Regulators have also been waging a war against Bitcoin. Law enforcement agencies and central banks claim it’s not a secure network as it’s vulnerable to attacks and manipulation while providing infrastructure for money laundering and crime.

However, all of these claims are not only unfounded but also completely false.

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While they could be disputed in numerous ways, Bitcoin transaction fees provide the simplest explanation.

Bitcoin transaction fees are the lifeblood of the Bitcoin network and are what secures the network both in the short term and in the long term.

Those critical of the network fear that as block subsidy reduces with each halving, the fees alone won’t be enough to keep miners from switching off their machines. Miners leaving the network en masse would drastically reduce the network’s speed and leave it highly vulnerable to attacks.

These claims are highly hypothetical and equally unlikely. The security of the Bitcoin network has remained strong since its inception over a decade ago. None of the major events the network has experienced have so far managed to make a crack in its security foundation.

In 2017, the network saw one of its first major congestion issues as Bitcoin made the run toward $20,000. Transaction fees spiked to their all-time high as a massive sell-off was taking place. Once a correction began, transaction fees began to drop considerably, leaving many to wonder whether such a sudden drop in miner revenue could impact the network.

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Since 2017, the Bitcoin network has settled trillions of dollars worth of transactions with just a fraction of the fees. Throughout 2022, miner fees have remained relatively consistent. As the Lightning Network and SegWit become more widely used, congestion will become an even rarer occurrence.

Total transaction fees on the Bitcoin network from 2010 to 2022 (Source: Glassnode)

Those concerned about the security of Bitcoin believe that it’s only a matter of time before it experiences an attack.

However, any type of attack on the Bitcoin network would unquestionably lead to a significant spike in fees in the mempool. Users would begin competing for the next block with higher and higher fees, making it more expensive for the attackers to take control of the network.

This is evident in the huge spike that occurred during the Terra (LUNA) collapse in May this year. The total amount of transaction fees waiting in the mempool increased by over tenfold as users began racing to sell their Bitcoin before it dropped too low. Those willing to pay higher fees saw their transactions processed and losses curbed, while those whose transactions got stuck in the mempool were forced to wait for the congestion to clear.

Total amount of Bitcoin fees in the mempool from November 2021 to September 2022 (Source: Glassnode)

This is a testament to the security of the network. Transaction fees are the lifeblood of the network that keeps it running and the defense mechanism that keeps it secure even in times of high volatility.

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Research: Ethereum’s move to PoS is trading off decentralization for scalability

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Research: Ethereum’s move to PoS is trading off decentralization for scalability

Research: Ethereum’s move to PoS is trading off decentralization for scalability Andjela Radmilac · 3 hours ago · 2 min read

On-chain analysis shows that Ethereum is trying to offset centralization with increased network stability following the Merge.

2 min read

Updated: September 21, 2022 at 12:11 am

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Cover art/illustration via CryptoSlate

With the Merge finally completed, Ethereum is now running as a Proof-of-Stake (PoS) network.

However, its transition from a Proof-of-Work (PoW) system has been highly controversial. Supporters of PoW mining feared that staking would centralize the network and threaten its independence. Those fighting for a PoS network touted the scalability and precision that would arise from the new system.

On-chain analysis provides us with a clear view of all the pros and cons of the Merge. Looking at the Ethereum blockchain shows when the transition from PoW to PoS occurred, with ETH mining difficulty and hash rate dropping to zero.

Graph showing the Ethereum hash rate and mining difficulty in 2022 (Source: Glassnode)

The centralization issues PoS opponents warned about are evident on-chain.

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The total amount of ETH transferred to the ETH2 deposit contract via staking providers currently stands at around 13.8 million ETH. Around 70% of that amount, or around 10 million ETH, is concentrated with just four staking service providers—Lido, Coinbase, Kraken, and Binance.

Graph showing the total value of staked ETH by provider (Source: Glassnode)

However, the number of active validators on the network has reached its all-time high. A higher number of independent validators drastically increases the decentralization of the network and offers a more positive alternative to the centralization seen among staking providers.

Active validators are defined as validators that have completed activation, aren’t lined in an exit queue, and have effective balances greater than 32 ETH. There are currently over 430,000 active validators, with the number increasing significantly since the Merge was announced in January 2021.

Graph showing the number of active validators on Ethereum from January 2021 to September 2022 (Source: Glassnode)

Another tangible benefit PoS brought to Ethereum is scalability.

The newly implemented deterministic block times brought a 15% increase in block space per day. The transition from PoW to PoS reduced block times from 13.5 seconds to 12 seconds, creating a precision staking consensus. Immediately following the Merge, the block interval median time and the mean programmed time dropped to 12 seconds.

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Graph showing the mean and median block times on Ethereum from October 2021 to September 2022 (Source: Glassnode)

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