From the perspective of on-chain data, exploring the gradual disappearance of BTC's cycles - ChainCatcher

Original Title: "Exploring the Gradual Disappearance of BTC's Cyclicality from the Perspective of On-Chain Data"

Original Author: Mr. Beg, on-chain data analyst

BTC, known as digital gold, is still young, and the disappearance of the four-year cycle is an inevitable path.

Key Points：

The strong cyclicality of BTC is inevitably gradually disappearing.

· Two peaks in 2021: The complete defeat of the Ke Zhou Qiu Jian faction

· For the first time in history: A significant change in the URPD chip structure

· Analysis methods & coping strategies after periodic disappearance

the inevitable disappearing periodicity

Most people in the crypto space are likely familiar with the strong cyclical nature of BTC. Originating from the design of halving every four years, the price movement of BTC seems to correspond perfectly with it.

At the end of 2013, the end of 2017, and the end of 2021, they correspond precisely to three cyclical peaks, following a pattern that occurs every four years, leading countless market participants to regard it as a guiding principle.

However, from a scientific perspective, simply attempting to retrieve a sword from a boat obviously cannot lead to rigorous conclusions.

As the impact of halving decreases over time, the growth of market capitalization has led to the absence of viewpoints that can withstand scientific scrutiny and support the four-year cycle theory.

If periodic disappearances occur in the future, how should we, as traders, respond?

The strongest group: market participants with holding periods between 1 year and 3 years

Historically, there has been a group whose behavior perfectly corresponds to the bull and bear cycles of BTC, and this group consists of market participants who hold for a period of 1 to 3 years.

(Chart Description: The proportion of market participants holding for 1-3 years)

We can clearly see that:

· Whenever this proportion reaches the bottom, it always corresponds to the peak of the price cycle.

· Whenever this ratio peaks, it always corresponds to the cyclical bottom of the price.

In simple terms, it means that every time the BTC price peaks, they just happen to have sold out; and every time the BTC price hits the bottom, they just happen to have accumulated a large amount of chips.

It is currently impossible to determine what is the cause and what is the effect, but it is evident that the emergence of bull and bear cycles is closely related to them.

In this chart, there are three points worth noting:

1. With each cycle, the minimum value of this proportion is increasing year by year. The reason behind this is not hard to speculate: more and more participants are choosing to hold BTC for the long term.

2. Currently, the proportion of this group is starting to shift to "increasing," which resonates with my logic of being bearish on BTC since the end of last year. For detailed content, please refer to my previous post (there are further updates in the comments section):

On-chain data detailed analysis: You may need to be prepared to escape the top at any time.

3. It can be reasonably inferred that the bottom value of this proportion will only continue to increase over time, from being obscure to the launch of the U.S. ETF, competing with gold. As BTC gradually comes into the public eye, more people will be willing to hold BTC.

The two peaks of 2021: the complete defeat of the seeking sword by boat school.

Previously, I had written several articles specifically discussing the double top in 2021.

In the article "Revisiting the Double Top of 2021: What is 'Future Data Leakage'?" I clearly pointed out the uniqueness of the double top of 2021 and explained in detail why one cannot seek a sword by carving a boat.

Article link:

In line with today's theme, I will analyze from another perspective:

(Chart Explanation: Realized Profit 已实现利润)

The so-called Realized Profit is calculated based on the principle of UTXO on-chain accounting, tallying how much profit is realized each day.

As I mentioned in my pinned post: Whenever there is a concentration of large Realized Profit, it indicates that a large number of low-cost chips are being sold off to realize profits, which is a major warning sign.

For a detailed analysis logic, please refer to the text below:

Top Signal Tracking: Massive Realized Profit Reappears

From the perspective of on-chain data, the current cycle actually ended in April 2021 (the first peak), when BTC created the second peak in November 2021.

As shown in the figure above, at the time of the appearance of the second peak, it was also accompanied by a massive amount of Realized Profit. So the question arises: "Where does this massive Realized Profit come from?"

Looking at the first chart, the proportion of holders with a holding period of 1 to 3 years actually bottomed out in April 2021. Therefore, the massive Realized Profit that appeared during the second peak can only be attributed to the group that accumulated chips from May to July 2021.

The point worth thinking about is here:

If future cycles gradually disappear, will there be more situations like this "temporary bottoming" followed by the start of a new wave of major rises?

As mentioned in my previous article, past peaks have often been accompanied by two large-scale distributions. This cycle did indeed see the second large-scale distribution occur in December of last year. However, with the potential decrease in volatility in the future, is it possible that only one distribution will be needed to complete the new bull-bear cycle belonging to BTC?

Worth pondering.

The First Time in History: The Huge Change in URPD Chip Structure

Next, let's talk about this topic from the perspective of chip structure.

(Chart caption: Comparison of URPD chip structure at the top of the last three rounds)

It can be seen that this cycle is the most special one so far.

The reason for saying this is because:

This is the first time in history that after a second large-scale distribution, a period of massive accumulation of chips in the top area has occurred.

Previously, I had also written about this topic, and detailed viewpoints can be found below:

BTC Chip Analysis: Discussing the Biggest Potential Chip Structure Risks on URPD

In this regard, we may have to acknowledge that BTC is entering a whole new era.

Analysis methods & response strategies after periodic disappearance

If the future becomes cyclical and indeed continues to weaken as expected,

As traders, how should we examine the market?

First, the conclusion: absolutely do not seek a sword by carving a boat, analyze using the logic of deduction

In the early life cycle of BTC, the sample size is severely insufficient,

Countless theories of the刻舟派 have been overthrown, one after another.

Shanzhai season, must rise during the New Year, must rise n days after halving ... etc., the clan is too numerous to prepare.

Not to mention the various metrics that were beaten in 2021.

Therefore, in order to overcome the problem of insufficient sample size, we during the research process,

It is essential to ensure the existence of logic as much as possible.

For example: AVIV Heatmap.

AVIV, can be seen as an optimized version of MVRV,

In terms of calculations, it focuses on active (rather than completely inactive) chips, excluding the impact of miners.

The AVIV Heatmap is one of the models I personally designed.

Utilize the mean reversion characteristic of AVIV to color according to its deviation.

The advantage of this analytical approach is that the calculation of deviation takes into account the "standard deviation."

The standard deviation is an indicator that can directly reflect the volatility of BTC.

Therefore, as the volatility decreases, the criteria for defining extreme values in the AVIV Heatmap will also be relaxed.

Conclusion

Let's make a simple summary:

1. As the market matures, the disappearance of cycles is an inevitable path.

2. The chips held for 1 to 3 years have dominated the bull and bear cycles in the past.

3. The emergence of the double top in 2021 marked the failure of the "carving a boat to seek a sword" methodology.

4. The chip structure has undergone a change that has never occurred before.

5. As a trader, it is essential to maintain logical consistency during the research process to ensure the usability of the results.

BTC is still young and is moving towards the eyes of the world at an unprecedented pace.

And you and I will both be witnesses to this historical feast.