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Bitcoin’s UTXO Indicates These Two Buying Levels

Bitcoin UTXO Indicates These Two Buying Levels
Bitcoin UTXO Indicates These Two Buying Levels
  • Bitcoin’s UTXO profit levels fall by 20% in one month, the lowest since October 2020.
  • Bitcoin’s buying levels by UTXO realization points are at $6,000, $13,000, and $21,000.

Bitcoin is down 32% in two weeks and over 60% in six months. Needless to say, there’s a bloodbath in the crypto markets. In this situation, there are two kinds of investors – investors looking to sell everything and never turn to crypto, and investors looking to buy. This is for the latter segment.

To understand when to buy, we need to look at where Bitcoin currently stands. Not on the price charts specifically, but in terms of where holders have purchased Bitcoin, and at what point does a profitable position or trade turn red.

UTXO Points To Huge Losses

With the markets as red as it is, losses are expected. But just how high are the losses?

Data from Glassnode suggests Bitcoin’s unspent transaction output (UTXO) is at 97.2 million or 21% down from its high in late March. Bitcoin runs on a UTXO system, which indicates the amount of the cryptocurrency that remains after a Bitcoin transaction. A UTXO profit is calculated based on whether the current price is higher than the price at the previous transaction. The last time Bitcoin’s UTXO was this low was in October 2020.

Source: Glassnode

This clearly indicates that a large number of Bitcoin holders are in minor profits (and many in losses) because of the massive fall. Now, let’s look at the prices at which these profits could flip into losses.

As can be seen in the chart below, the UTXO realized price distribution suggests most of the accumulation was between $38,000 and $41,000. This was partly because of the range-bound movement BTC saw between mid-April to the start of May. Beyond this, the next accumulation phase is between $6,000 to $11,000. This accumulation was between March 2020 to May 2020 when Bitcoin dropped below $4,000 but quickly recovered and ended above $20,000.

An interesting finding in this chart is, that there is little to no accumulation between $14,000 to $30,000. This was because Bitcoin broke past these levels in quick succession in 2020. Investors either waited for higher levels or stayed away from crypto, only to get back at the $38,000 to $40,000 levels.

When To Buy?

The question of when to buy crypto is a personal one. That said, the data indicates that most Bitcoin buys will revert back to profit-neutral positions i.e. where UTXOs peaked as on the previous chart.

Another buying opportunity can be seen in the range of $20,000-$22,000, which is where Bitcoin’s 200 moving average lies on the weekly chart.

Source: BTCUSD via Trading View

Either way, the levels are lower than the current price movement. These are where the buying power lies. And these are where prices are likely to hold. But given that Bitcoin swiftly dropped from $40,000 to $27,000, can we really put any faith in price levels?

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