Quant Explains Similarities Between Current And Summer 2020 Bitcoin Markets

Keshav Verma

1 year ago

3 mins read

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A quant has pointed out some similarities between the current and summer 2020 Bitcoin markets through on-chain data.

Bitcoin Exchange Supply Shock Ratio Has Rapidly Risen Recently

As explained by an analyst in a CryptoQuant post, there seem to be some similarities between the current market trend and that during the summer of 2020.

The “exchange supply” is an indicator that measures the total amount of Bitcoin present on wallets of all exchanges.

This supply is usually assumed to be the selling supply of the crypto as investors generally transfer their coins to exchanges for selling purposes.

The supply in cold wallets of investors, on the other hand, is likely being held for accumulation, and is unlikely to be sold.

The ratio between this investor wallet supply and the exchange reserve is called the “exchange supply shock ratio.”

When the value of this metric goes up, it means the supply on exchanges is dropping and investors are filling up their cold wallets.

On the other hand, a downtrend suggests a push to sell from sellers as they deposit their Bitcoin to centralized exchanges.

Now, here is a chart that shows the trend in the BTC exchange supply shock ratio over the past couple of years:

The value of the indicator seems to have been on the rise recently | Source: CryptoQuant

In the above graph, the quant has marked the relevant trends of similarity between the Bitcoin markets of summer of 2020 and of right now.

It looks like during both the periods, the price was trending down or moving sideways, while the exchange supply shock ratio had been rapidly going up.

Despite the struggling price at the moment, investors have showed demand for the crypto as they have been rapidly accumulating recently (similar to back then).

What followed a few months after the summer of 2020 was the start of a new Bitcoin bull run due to the resulting “supply shock.”

The BTC price is heavily tied to the stock market currently, and the analyst believes it’s possible that once it decouples, a similar shock could be there this time as well.

BTC Price

At the time of writing, Bitcoin’s price is trading around $39.8k, down 7% in the past week. Over the last month, the crypto has lost 15% in value.

The below chart shows the trend in the price of the coin over the past five days.

The price of the crypto looks to be steadily climbing back up after the plunge down a few days ago | Source: BTCUSD on TradingView

Featured image from Unsplash.com, charts from TradingView.com, CryptoQuant.com

Keshav Verma

Keshav is currently a senior writer at NewsBTC and has been attached to the website since June 14, 2021.

Keshav has been writing for many years, first as a hobbyist and later as a freelancer. He has experience working in a variety of niches, even fiction at one point, but the cryptocurrency industry has been the longest he has been attached to.

In terms of official educational qualifications, Keshav holds a bachelor’s degree in Physics from one of the premier institutes of India, the University of Delhi (DU). He started the degree with an aim of eventually making a career in Physics, but the onset of COVID led to a shift in plans. The virus meant that the college classes had to be delivered in the online-mode and with it came free time for him to explore other passions.

Initially only seeking to make some beer money, Keshav unexpectedly landed clients offering real projects, after which there was no looking back. Writing was something he had always enjoyed and to be able to do it for a living was like a dream come true.

Keshav completed his Physics degree in 2022 and has been focusing on his writing career since, but that doesn’t mean his passion for Physics has ended. He eventually plans to re-enter university to obtain a masters degree in the same field, but perhaps only to satiate his own interest rather than for using it as a means to find employment..

Keshav has found blockchain and its concepts fascinating ever since he started going down the rabbit-hole back in 2020. On-chain analysis in particular has been something he likes to research more about, which is why his NewsBTC pieces tend to involve it in some form.

Being of the science background, Keshav likes if concepts are clear and consistent, so he generally explains the indicators he talks about in a bit of detail so that the readers can perhaps come out having understood and learnt something new.

As for hobbies, Keshav is super into football, anime, and videogames. He enjoys football not only as a watcher, but also as a player. For games, Keshav generally tends towards enjoying singleplayer adventures, with EA FC (formerly FIFA) being the only online game he is active in. Though, perhaps due to being ultra-focused on the game, he is today a semi-pro on the EA FC scene, regularly participating in tournaments and sometimes even taking back prize money.

Because of his enthusiasm for anime and games, he also self-learned Japanese along the way to consume some of the untranslated gems out there. The skill didn’t merely remain as just a hobby, either, as he put it to productive use during his exploration for small-time gigs at the start of COVID, fulfilling a couple of Japanese-to-English translation jobs.

Keshav is also big into fitness, with agility and acceleration-related workouts making a big part of his program due to the relevance they have in football. On top of that, he also has a more traditional strength based program for the gym, which he does to maintain an overall fitness level of his body.

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