 Bitcoin price action has been quite static recently, that may be the calm before the storm. According to Glassnode analysts, on-chain metrics are signaling that a major price move is imminent. Now the main questions are, in what direction will this move go and how should you prepare for it? To find out, we looked at on-chain data with Glassnode analyst James Czech. Before we start, as always, don't forget to like the video and subscribe to our channel. Also turn on the notification bell to keep up-to-date on our next videos. I'm Giovanni on this show, we challenge the ideas that shape the world of crypto. In each episode we assess a crypto narrative, a macroeconomic outlook or a potentially disruptive technology. Only the most solid ideas will make it to the other side. In a recent report, you pointed out that we are living through a period of relative calm in the in terms of price action. So Bitcoin has been trading within a quite tight range with very low levels of volatility and very low levels of volume, which is quite rare. You point out that it's usually a sign that a big price move is coming up soon. So what does it make you think so exactly? Yeah, absolutely. I mean, it's kind of the nature of markets. We generally see range expansion, range contraction. So the market likes to move, consolidate in a certain price range and what happens is you reach a point when sellers of all sorts, people who are taking profits, people who are taking losses, basically everybody comes to terms with the current price range. This plays out in technical analysis and on-chain analysis where you see this kind of compression and we've seen it across a lot of things. We've seen price trading within a very, very narrow band. Trading volume is down quite significantly. This is a structural trend as well. This is not just a local phenomenon. We've had kind of a multi-year decline since 2021 of trade volumes and we see that in on-chain volumes as well. Just the sheer amount of coins that are transacting are getting fewer and fewer. So it's really getting to the sucking out of all the liquidity, prices compressing and very rarely does Bitcoin sit still like this for very long. It usually proceeds a regime of higher volatility. Traders have essentially, prices consolidated. Traders have bought and sold and the next move, whatever the volatility is going to be, whichever direction that's going to be the new incentive for investors to basically take a new position and move from where we currently are. You basically said that whether this price movement is going to go up or down, it depends on the short-term holders. So why is it that? Yeah, absolutely. So at Gloucester, we've got a heuristic called long-term and short-term holders. And the reason we use this is that there's a threshold of about five months. And once a coin has been in an investor's wallet for that period of time, it's statistically much less likely to be spent. So we put them in the long-term holder bucket, the hodler bucket, however we want to describe it. Now, if we look at hodler supply, we've got many metrics. Coins older than one year, older than two year, three year, five year, they are all pushing up to new all-time highs. So we're basically seeing that the hodlers are not doing anything. They're just sitting tight and their spending is extremely low. So the other side of the equation is the short-term holders. And not quite, but the actual threshold for that kind of band more or less is 2023. We're coming up on five months now. And so essentially, the short-term holders encompasses everybody who acquired their coins in 2023 onwards, which for the most part has now been an uptrend. So what we're basically seeing is that the long-term holders are not doing much. So that means that the short-term holders are going to be the primary driving factor. And where we sit at the moment is an interesting dynamic where we look at their cost basis, what's the average price at which all these people acquire their coins? We're currently sitting on it 26,500, I think last I checked. And generally speaking, that is at a psychological level of support across the whole market. People are kind of sitting at their cost basis. They're not in profit or loss. They're not spending any significant margin. So if we get another rally higher, it could create a greater incentive for people to take additional profits, right? We're up 70% on the year. If there's another rally that could get up to 100%, you get an incentive. Likewise, there's a bunch of those people who bought their coins over the course of the last two months and are currently underwater. So there's already a group of these people who have bought their coins and they're kind of sitting there going, I'm actually underwater on my coins. And if we get a sell-off from here, there may be that panic. So generally speaking, they're going to be the cohort that kind of accelerates the move in whichever direction it goes. I also had a look at one of the Glassnode co-founders. He said that he's predicting a 35,000 for Bitcoin in the midterm. I think that he means in the summer, in the course of the summer, basically predicts he's pretty confident that a rally to 35,000 is on the cards. What's your take on that? Is it too optimistic? Yeah, I think it's an interesting price level because there's a couple of models that sit up there. So you'll often hear people talk about the realized price, which is basically the average price of all coins that have moved in the supply. Now, my team has been doing some work studying because is it really fair that we look at Satoshi's coins, which are holding extraordinary profits at all the lost miners and all the rest of it? So we've been doing some work to analyze what happens if you remove those lost coins. And the reason why we're doing that is because those lost coins are going to mask. If you've got hundreds of billions of dollars worth of profit that's never going to get spent, you're going to hide the 100 billion dollars of losses that people who bought in the previous cycle are holding. So we've been doing a couple of models to try and isolate the economically active investors. What is their cost basis in removing all those lost coins? And interestingly enough, the level that we find when we start extracting that is up there around that 32, I think it's about 32,000, that kind of realm. So my instinct tells me that's kind of where the true cost basis is sitting. It's where kind of the mean reversion level would be. So I rallied to that level to be honest, wouldn't surprise me. However, what I'm also conscious of is that when you come up to people's cost basis, they've just weathered a 2022 bear market, there's a lot of people out there who are just waiting to get their money back. Just get me out of this Bitcoin thing, I don't want to deal with this bear market anymore. So that uncertainty is something that we still have to work through. So very similar to 2019, similar to 2016, there was like a 12 month period in both of those instances, which was kind of a long term sideways chop, a re-accumulation period. And it wouldn't surprise me if that kind of 32 level was somewhere around kind of the middle point of that midpoint or maybe towards the ceiling of that level. So certainly there's a lot of models that would indicate price wants to go up there, but I can also see that that's an area where you'd start getting more resistance, people who are up there and kind of waiting for their money to come back, give me whatever liquidity I can. I suspect there'll be a lot of resistance as we get through that point. I hear very often this comparison with 2019, like as the 2023 point where we are now can be compared to the point we were in 2019 in terms of cycles, price cycles, market cycles. And what I was listening to an analyst was making the point that in 2019, we had half a year, which was basically in the red and half a year in the green. So the first part of the year was quite bullish. Then the next half was bearish, it went down. And then we recovered only in 2020 when we had the start of the bull run. But so do you think that there is a chance that this secrecy is going to play out again in 2023, the year right before the year of the halving? Yeah, I think it'll be similar but different. So I think that 2019 kind of looking for that, we call it an echo bubble, where you kind of get like a second miniature bubble, there it goes, oh look, the bull market's back. And then it turns out that you still got a year of bear market ahead of you. The interesting thing about 2019 is there was a huge spot bid, which was driven by the plus token Ponzi in China. So this was kind of this unknown, we didn't know about this at the time, so prices rallying and went from 4,000 to 14,000 in I think it was about three months or four months. And we didn't know this until very late in the cycle, that there was actually this kind of tremendous spot bid that wasn't being accounted for. Now where we currently sit, to be honest, if I was going to give more of where I think it's going to look like, I actually think something closer to a 2016 is closer to what I expect. And there's a couple of reasons for this. The first one is that we don't have that kind of insane spot bid. There's not kind of like a discrete thing that's causing that bid just yet. And certainly I'm very cautious because transaction volumes are very low. And transaction volumes, exchange inflows, exchange outflows, they're all cyclically low. And that's a good proxy for demand in my book. So I'm not yet seeing kind of like this enormous inrush of buy side volume. But what I am seeing is that the people who are still here, right, the people who survived the bear market and still believe Bitcoin, they are still very much active. So it's kind of that dollar cost average just slowly chipping away at it. And the other thing to note is that leverage is extremely low right now. We've seen futures markets deleveraged significantly. A lot more open interest has moved across to the option space, which is generally more contained market. It's less so, options will tend to just expire worthless. They're less so kind of futures that will drive massive deleveraging events. So we've seen it deleveraging. And we've also seen following FTX a preference for spot. So people have been pulling coins off exchanges by and large, kind of, you know, they've seen FTX go down and they just don't want that to happen to them again. So we're in this regime where it's more spot driven in my view. And I think that's probably more likely to resemble the 2016 style than it is to do a 2019 style. Another respected analyst, Mike McGlone from Bloomberg, who is focused on macro, is quite bearish towards the upcoming price action for Bitcoin. Basically, he's saying that liquidity is still being pulled out from the market. He says that the macro doesn't look good, that we're going to probably not have a soft landing in the US. And so the whole macro environment that he describes is not good for risk on assets. And Bitcoin is still very much a risk on asset. So for the midterm, he's still pretty bearish on Bitcoin. What's your take on his opinion? No, to be honest, I think it's actually a very sane take. And, you know, the funny thing about the current market regime is anybody that knows where price is going to go is just dead wrong. Because some of the smartest investors in the world are saying the same message, which is that this is the hardest market they have ever seen to predict what's going on. And you'll find very credible analysts saying that the markets are going to all time highs, stock markets and everything else. And you'll find other very credible analysts saying that it's seriously dark out there. I think really it's the time for people to be nimble. And at the end of the day, that's why you'd look at on-chain data so discreetly, is that it tells me what investors are doing with respect to Bitcoin. And as you mentioned, Bitcoin is kind of one of these indicators of liquidity. We see it the first and fastest fire alarm to respond when things start to happen. So in many ways, you should actually start seeing these things playing out. Bitcoin is kind of like the index. If liquidity starts getting pulled out because the US government's got to refill the Treasury general account, Bitcoin's going to feel that and it's probably going to feel it first. And you'll start seeing that reaction playing out in Bitcoin investors' behavior. So no, I think it's a very sane perspective. It's certainly something that I've got on my eye on as well. So I'm certainly not blindly bullish. I'm actually quite cautious, certainly in the short term over the next couple of months. But again, we see these cycles play out. Who knows? We could equally go to all-time high. It's a crazy world out there. Let's see how it plays out, how this trend plays out. And yeah, thanks a lot, James, for coming on our show. It was, as always, a very interesting conversation. A pleasure, mate. Thanks for having me on. Cheers.