Bitcoin On-Chain Analysis: Liveliness Indicator Drops Due to Reduced Profit Taking

In this article, BeInCrypto takes a look at Bitcoin on-chain indicators like liveliness to try and determine if old coins are being moved or not.

This liveliness indicator normally spikes near the end of bullish cycles but decreases during corrective periods. An all-time high reading of 0.622 took place on Aug 5, during the price rebound that followed the May 19 crash.

What is liveliness?

Liveliness is a metric that gives insight into the behavior of holders. The value increases as holders start liquidating their positions, while it decreases when those coins remain dormant.

The metric hovers between 0 and 1. If the entire supply of coins were to move in one single block, liveliness would reach a value of 1. It can also help in determining if a coin has an inflated market cap. For example, pre-mined coins usually have very small liveliness values, very close to 0.

However, the most common use of the indicator comes from the direction of its slope. When it’s moving upwards, it means that old coins are being spent. The opposite is true when it’s moving downwards.

Historical Bitcoin liveliness

A look at the historical BTC price movement shows that the liveliness indicator usually spikes near the top of bullish cycles.

This was visible in the 2013 and 2014 BTC price peaks (black circles). This can be read as a sign that long-term holders are realizing profits after staying dormant for a significant period of time.

Following these spikes, the indicator normally decreases as the price corrects.

Similarly, the same occurrence was observed in the 2017 and 2021 upward movements (black circles). The final spike transpired in April 2021, during the current all-time high price.

Current readings

A closer look shows that the actual liveliness all-time high of 0.62 occurred on Aug 5, considerably after the April 13 all-time high.

Therefore, significant profit-taking occurred during the bounce after the May 19 dip.

However, the indicator has been decreasing since, suggesting that profit-taking has now come to an end.

For BeInCrypto’s latest Bitcoin (BTC) analysis, click here.