Bitcoin On-Chian Analysis: The Liveliness Indicator Shows Long-Term Holders’ Profit-Taking Is Over

In this article, Bitcoin Magazine examines Bitcoin’s on-chain indicators, more specifically liveliness, to see if old coins are being moved.

The vibrancy indicator usually rises towards the end of a bullish cycle but falls during corrections. The all-time high of 0.622 was hit on August 5th during the price rally following the May 19th crash.

What is the liveliness indicator?

The liveliness indicator is a metric that gives insights into the behavior of the owners. The value increases as the holders begin to liquidate their positions and decreases when these coins are dormant.

The index fluctuates between 0 and 1. If the entire amount of money moves in a single block, the liveliness reaches a value of 1. It can also help determine whether a coin has an undervalued, excessive market capitalization or not. For example, pre-minted coins often have a very small liveliness value, very close to 0.

However, the most common use of this indicator comes from its direction of inclination. If it goes up it means the old coins are being used. The opposite is true when it is moving down.

Bitcoin liveliness story

Looking at historical BTC price movement, the vibrancy indicator often rises near the top of a bull cycle.

This can be seen in BTC’s peaks in 2013 and 2014 (black circles). This can be seen as a sign that long-term owners are taking profits after prolonged inactivity.

After these spikes, the indicator usually falls as the price corrects.

The same occurrence can also be seen in the upward moves of 2017 and 2021 (black circles). The last surge occurred in April 2021, at a time when BTC price hit its current all-time high.

The source: Glass knot

Current reading status

A closer look reveals that vibrancy hit an all-time high of 0.62 on August 5th, significantly higher than the April 13th high.

As a result, there was heavy profit-taking during the rebound from the May 19th decline.

However, since then the indicator has gradually been falling, suggesting that profit-taking has ended.

The source: Glass knot

You can see the BTC price here.

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