The cryptocurrency market is full of creatures. Each species represents the corresponding type of investor for its size. Which in on-chain analysis is simply an address with a specific BTC balance.
The humblest of the crypto-animals are shrimps. These are investors who hold less than 1 BTC in their hands. They broadly represent a group of retail investors. Interestingly, on-chain analysis shows that they are getting smarter.
The recent long-term trend of shrimp buying the dips is a sign of growing adoption and education in the crypto space. Moreover, when juxtaposed with the percentage of addresses in profit, it may signal an impending bull market.
Shrimp Are Getting Smarter and Buying the Dips
Leading Glassnode analyst @_Checkmatey_ published a tweet yesterday highlighting his “favorite chart.” It relates to the long-term behavior of the so-called shrimps, i.e., Bitcoin network addresses with a balance of less than 1 BTC.
In the chart, we see many details that illustrate the radical change in the behavior of small Bitcoin investors over two consecutive cycles of the cryptocurrency market. First of all, on the left side of the chart, we see a spike (red circle) at the end of 2017.
At that time, at the very end of the previous cycle’s bull market, shrimps bought more than 50,000 BTC during the month. Collective FOMO trapped short-term investors who learned the basics of investing the hard way.
In contrast, on the right side of the chart, we see the behavior of the same shrimp addresses at the end of the 2022 bear market. Interestingly, the explosion in retail buying occurred at two market lows – during the collapse of 3AC (June- July) and the implosion of FTX (November- December).
We get additional positive information when analyzing the behavior of small investors from January 2022 until now (green arrow). It turns out that shrimps are steadily increasing their positions and stacking sats. Shrimps have accumulated as much as 1.35 million BTC, representing 6.9% of the supply of the largest cryptocurrency.
Crypto Education in Making
Checkmate comments on his chart in a very optimistic tone. Regardless of the price action, he points out that the extremely different behavior of on-chain retailers suggests growing adoption and investor awareness. In addition, he notes the effectiveness of multi-track education in the cryptocurrency sector. The analyst writes:
“I believe this chart above all others presents the success of the tireless efforts, breadth of conversation, and shared wisdom of the #Bitcoin education machine.”
In his view, such informed and bold buying of the dips would not have been possible without retail investors’ corresponding level of knowledge. Moreover, he stresses, “Bitcoin doesn’t pay us to learn, speak, study and analyse this thing.” This effort is an added value in the cryptocurrency community. Which believes that its common good is the selfless exchange of ideas and the spread of crypto evangelization. Checkmate concludes:
“Bitcoin is a forcing function for a better world. Not because we change it, or because it necessarily changes the world. Bitcoin changes us, for the better, and ya love to see it.”
Addresses in Profit Test Double Historical Support
Shrimps are getting smarter and buying Bitcoin at the best price. Alos, there is an interesting situation on the long-term chart of the percentage of BTC addresses in profit. This indicator shows the percentage of unique addresses whose coins have an average purchase price lower than the current price.
First of all, we see that the recent declines in the BTC price have led the metric to re-test the historical support area in the 55-60% range (blue area). At the beginning of the previous two bull markets (red arrows), this area acted as support and signaled the start of an uptrend.
Of course, in the first quarter of 2020, there was a significant deviation below this level. This was a consequence of the black swan in the financial markets caused by the outbreak of the COVID-19 pandemic (purple arrow).
There is a chance that holding this area will also act as a catalyst for a forthcoming Bitcoin bull market. Moreover, shrimps can be expected to continue buying if their balances remain in profit.
Moreover, the metric of the percentage of addresses in profit seems to follow a long-term increasing support line (black). This line has been validated twice before (yellow circles) and has had two deviations below it.
Currently, the chart is testing this historical support again. With the confluence of the 55-60% range, there is a good chance that a bounce will occur. If this happens, it could provide another on-chain signal that a cryptocurrency bull market has begun.
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