Bitcoin to $100K? 3 On-Chain Signals Say This Rally Is Different

Bitcoin is flirting with $100,000 again. We've seen this movie before, haven't we? Each time Bitcoin approaches a new psychological barrier, the marketing machine goes into overdrive. This time, that story is proving out with the direct support of on-chain data. Does this information truly illuminate anything that we haven’t previously known? Or are we simply engaging in confirmation bias and just noticing trends that fit our perspective? I’m the guy that’s always gonna try to bring a healthy dose of skepticism to this discussion.

Is This Time Really Different?

That's the million-dollar question, isn't it? As Will Clemente at Glassnode is back, spotlighting on-chain metrics. He contends that those indicators reveal this rally is the real deal, writing it’s a “classic sign of pre-rally accumulation.” Declining exchange balances and long-term holder accumulation are the two usual suspects commonly cited. Let's dig deeper.

Yes, exchange balances are dropping. But where is that Bitcoin going? Are these coins really being locked up in cold storage, never to be sold? Or are they moving to DeFi platforms, where they can be employed to earn yield? Or maybe to advanced custodial offerings well beyond the scope of basic exchange balance holding. If the latter is the case, then the story of “accumulation” is a false one. The coins can be used for all sorts of things across the crypto ecosystem. Yet, this activity doesn’t necessarily mean a long-term bullish trend is on the horizon. This is far from a "classic sign".

A third important signal is who’s accumulating. But you really have to get in the weeds and look at who’s building up, not just how much. Are these new whales, or the old OGs back?

Now, let’s get real, much of the above speculation has been driven by the belief that “this time is different,” has it not? And yet the dot-com boom, the housing bubble – they all felt different in the moment. Human psychology hasn't changed. We're wired to see patterns, even when they don't exist. And the crypto market, due to its built-in volatility, is a hotbed for these false positives.

On-Chain Data: Crystal Ball or Rorschach Test?

On-chain data offers valuable insights, no doubt. But it's not a crystal ball. It's more like a Rorschach test: we see what we want to see. We tend to look at new data with a bias based on what we already believe to be true.

Take the concept of "long-term holders." While it's true that these holders are less likely to sell during short-term dips, that doesn't mean they won't sell. Everyone has a price. And if Bitcoin goes to $100K, $120K or higher, many of those long-term holders will want to lock in their profits. After all, why wouldn't they? This is not an entirely benevolent cause, it is an investment.

Furthermore, on-chain metrics can be gamed. Yet sophisticated traders will be able to employ many different techniques to manipulate the data directly and induce a false sense of scarcity or demand. We should be mindful of these potentialities and not be quick to accept on-chain data at face value. The key is to ask the simple question: Is it possible that this data is misleading?

Singapore's Regulatory Tightrope Walk

Now living in Singapore, I’m increasingly unable to separate myself from the regulatory conversation. The Monetary Authority of Singapore (MAS) is actively encouraging innovation in the space. So at the same time, it is hugely rolling out with a risk-mitigating, go-slow approach. Look for tighter licensing regime for crypto firms. In addition, regulators will step up enforcement and educate the public on the risks of investing in digital assets.

This pressure from regulators may prove to be a double-edged sword. On the one hand, it can push less scrupulous players out of crypto and help foster a more stable and sustainable crypto ecosystem. On the flip side, it risks suppressing innovation and forcing activity underground, which may make it more difficult to track and regulate.

MAS has been notoriously hard-line against crypto of late. Plus, it’s hard to tell if that good news is a positive development for the long story overall.

So in the end, it’s hard to tell what effect Singapore’s regulatory approach had on Bitcoin’s price. It’s something that can’t be overlooked. It’s the third reason to be skeptical — because heavy-handed regulation would negatively impact the value.

Bitcoin hitting $100,000 is possible. Analyst Tony Sycamore rightfully noted that now that Bitcoin has confirmed $94,000 as support the door is open for $100,000. Of course, possible and probable are two very different things. As interesting as this on-chain data is — it’s a good start — it’s not the final word. Macroeconomic conditions, regulatory actions, and black swan events may still yet spoil the rally.

Don't get caught up in the hype. Don’t get hoodwinked by fear of missing out (FOMO). As with any investment, do your own research, understand the risks, and invest responsibly. And as always, past performance is not an indicator of future results.

Here's a balanced view:

Don't get caught up in the hype. Don't let fear of missing out (FOMO) cloud your judgment. Do your own research, understand the risks, and invest responsibly. And remember, past performance is never a guarantee of future results.