Glassnode Analysis: How to determine the bottom of the virtual currency market and the time to buy?

How to determine the bottom and entry time of the virtual currency market? In the rapid evolution of the digital asset market, accurate data analysis has become the key for traders to grasp the pulse of the market. Glassnode’s newly launched 28 segmented indicators also mark a major leap forward in on-chain analytics. These indicators not only provide deep insights into short-term holder behavior, but also provide traders with powerful tools for identifying market bottoms and optimizing trading strategies.

In an important development in the field of on-chain analytics, Glassnode recently launched a set of 28 new indicators designed to provide a more nuanced view of the digital asset market. You can read our original announcement here to learn more.

These granular indicators can be a game changer for traders. They provide highly detailed and intuitive insights that can be turned into potential buy and sell signals. A powerful use of these new indicators is to identify the level of seller fatigue among different age groups among short-term holders.

Using our newly segmented indicators, traders can now more precisely determine the severity of unrealized losses and timing of stop losses, which often mark market bottoms and potential entry points during bull markets. This report explores this framework in detail and summarizes it below, providing actionable insights for traders aiming to optimize market entry or DCA strategies.

Today, the editor of this site will share with you Glassnode analysis: a detailed introduction on how to determine the bottom of the virtual currency market and the timing of purchase. Friends who need it, please take a look!

Why focus on short-term holders?

In the context of on-chain analysis, long-term holders (LTH) and short-term holders (STH) represent groups with different behaviors and market impacts. Short-term holders are usually new entrants or speculative traders and are more sensitive to price changes. During bull markets, these investors tend to be the ones who lose the most because they are more susceptible to selling due to market fluctuations. This phenomenon makes the analysis of short-term holders particularly valuable when used to identify market bottoms.

Benefits of applying segmentation indicators to STH

By segmenting the short-term holder group by age, we help traders more effectively identify periods of seller exhaustion. For example, we can observe how loss pressure and capitulation events spread within the short-term holder group, starting from the shortest time frame (1 day), to longer time frames (1 week to 1 month, and even longer ). This inside-out progression provides a clearer signal of a potential bottom and a market reversal.

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In other words, with the insights provided by more granular indicators, traders can detect capitulation on different short-term time frames A confluence of events, thereby greatly increasing the likelihood of identifying a short-term bottom.

A framework for identifying local bottoms in a bull market

To identify states of seller exhaustion, we use a series of key indicators that provide insights into unrealized and unrealized trends within the short-term holder group. Insights into realized losses. The framework consists of the following metrics:

STH MVRV by Age: Market Value to Realized Value (MVRV) measures the unrealized profit or loss of an asset. When MVRV is significantly below average, it represents a high degree of unrealized losses among its holders. This helps detect early signs of sell-side pressure, as significant unrealized losses often precede actual selling activity by short-term holders.

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STH SOPR by Age: Spent Output Profit Ratio (SOPR) provides an analysis of the observed MVRV Insights into whether unrealized financial stress is acted upon. A negative SOPR Z score indicates that short-term holders are capitulating, selling their assets at a loss and adding to seller pressure.

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STH Realized Loss by Age: This indicator assesses the magnitude of losses that short-term holders have realized. High realized loss values ​​confirm that sell-side stress identified by the MVRV and SOPR indicators has manifested, validating periods of sell-side exhaustion by quantifying the magnitude of realized losses.

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By using Z-Scores, we normalize these metrics, making it easier to compare and identify significant deviations from the mean. Z-Scores highlight periods of extreme behavior, making it easier to detect when unrealized and realized losses are unusually high. This normalization helps identify true periods of seller exhaustion, providing traders with clearer signals by filtering out the noise and focusing on statistically significant events.

Practical Applications for Traders

Using Glassnode’s new segment indicator to identify points of seller exhaustion in bull markets can provide traders with many advantages. Here are the main advantages:

• Early Detection of Local Bottoms: By identifying moments of severe unrealized losses and capitulation among short-term holders, traders can identify market bottoms before they become apparent, providing Opportunities for early entry points.
• Optimized Dollar Cost Averaging (DCA) Strategy: Understanding periods of seller fatigue allows traders to implement DCA strategies more effectively, purchasing assets at lower prices at market bottoms to lower average purchase costs.
• Enhanced Market Timing: By observing how sell-side pressure propagates within the short-term holder group from the shortest time frames to longer time frames, traders can better time market entries and exits, Thereby maximizing profits and minimizing losses.
• Strategic Flexibility: Segmenting short-term holders by age group allows traders to apply this framework to a variety of trading strategies, from day trading to swing trading to ensuring they can adjust to specific market conditions. their methods. By leveraging the insights provided by our new segmented indicators, traders can gain a competitive advantage in the market and make more strategic and profitable decisions.

Start trading with Glassnode’s segmented indicators today

Currently, these powerful segmented indicators are only available on the Glassnode Enterprise plan. A complete overview of the new metrics, dashboards and documentation is available here.

If you are an institutional trader or investor and would like to use these indicators to gain a deeper advantage when trading the Bitcoin and Ethereum markets, please contact our institutional sales team today.

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