Bitcoin’s On-Chain Bull Run: Red Indicator Alert

Bitcoin OGs are getting ready to cash in on their profits ahead of the upcoming Bitcoin halving, according to an indicator favored by cryptocurrency traders. The Value Days Destroyed (VDD) Multiple recently spiked above 4.0, leading some crypto commentators to speculate that the bull run may be coming to an end. The VDD Multiple is designed to identify instances where the price of Bitcoin may be overheating and approaching its peak during major market cycles. A higher VDD Multiple suggests that more Bitcoin is entering the market, likely to be sold. Currently, the VDD Multiple stands at 3.03, having briefly reached 4.21 on March 28. This is a significant increase compared to its value at the beginning of the year, which was around 2.04 on January 1, according to GlassNode data. The last time the VDD Multiple exceeded 4 was in January 2021, when the price of Bitcoin was $40,257. This peak did not lead to a market downturn as Bitcoin’s price promptly rose. Just two months later, Bitcoin surged by 52.2% to reach $61,283 in March 2021, according to CoinMarketCap data.

The Bitcoin halving is only nine days away and the VDD Multiple has already surpassed levels observed before previous halving events. Prior to the last halving in July 2016, the VDD multiple stood at 0.419, and it reached 1.606 ten days before the 2020 Bitcoin halving. A senior researcher at GlassNode, known as CryptoVizArt, attributed the high VDD multiple levels to significant outflows from Grayscale’s Bitcoin Trust (GBTC). He stated that the movement of Grayscale coins since January 10 has led to the surge in the VDD multiple. The approval of spot Bitcoin exchange-traded funds (ETF) for trading by the United States Securities and Exchange Commission (SEC) on January 10 was seen as a catalyst for these outflows. Since then, GBTC has lost a total of $15.96 billion in assets, partly because of its high fees compared to other Bitcoin ETFs, according to Farside data.

Bitcoin has seen a 56% surge in price since January, rising from $44,172 to its current price of $69,260 at the time of writing. The VDD Multiple spike suggests that Bitcoin OGs are preparing to sell their holdings before the halving event. The halving, which is a mechanism designed to reduce the creation rate of new Bitcoin by half, typically leads to increased scarcity and a potential surge in prices. The VDD Multiple’s spike could indicate that the market is becoming overheated, and a correction could be on the horizon. It is important to note that past spikes in the VDD Multiple did not always result in market downturns, as seen in January 2021. It will be interesting to see how the market behaves in the coming weeks as the halving event approaches.