Crypto derivatives exchange ZUBR released a report detailing how blockchain analytics can give retail traders valuable forecasts of price direction. Using data from Glassnode, the research shows that traders can use live blockchain analytics to assess market economics of supply and demand.
Put simply, bitcoin balances indicate the supply on exchanges; while monitoring tether, the most popular stablecoin used to buy bitcoin, can assess demand. ZUBR has exclusive agreements in place which allow it to offer all traders on its platform access to real-time data as standard.
Key points from the research are:
- Trends can be established from looking at blockchain analytics data, which paints a near live picture of supply and demand. For a majority of extremely volatile days in 2019 to 2021, this blockchain analysis provides early tells.
- Bitcoin and Tether balances are key indicators of supply and demand, and blockchain analytics will give traders an important advantage in forecasting price directions, helping to mitigate the risk of big price swings.
- Important price movements – whether moving high or low for the day – are preceded by a supply jolt on an exchange.
- Even during low periods of reward, miners continued to supply the market, sending more cryptocurrency to exchanges in 2020 than in 2019, indicating a ready and fundamental support of demand.
- Tracking the balance of digital assets, coupled with long block times during heavy periods, leaves a good window of opportunity for traders to properly assess the potential price action to their benefit.
As a case study, the research examined the bitcoin price rally in January 2021, when prices hit an all-time-high of over $40,000. Analysis of the blockchain shows that the rally was, by and large, a fundamental supply and demand reality, indicating the growing maturity of the crypto market.
Unlike the price rallies seen in 2017, which were driven by a large retail crowd, the recent price hike was the result of dwindling cryptocurrency supply on exchanges. According to ZUBR’s research, cryptocurrency ready for sale had dropped a massive 20% by the end of 2020. At the same time, exchanges held an average 1.3 billion USDT (tether), nearly double the amount they held at the start of 2020.
This clearly indicated traders were looking to take profits, and were waiting for more opportunities; “The writing seems to have been on the wall as to a strong recovery for anyone who was paying attention”, according to the report.