Dreaming Back to 2021: A Review of the Two Peaks of 2021
In this article, we will revisit the two peaks of 2021.
(Background Summary: On-Chain Data Academy (IX): Market Barometer RUPL (I) – Data Introduction Bottom-Fishing Application)
(Background Supplement: On-Chain Data Academy (X): Market Barometer RUPL (II) – Strongest Peak Signals Detailed Analysis of Historical Cycle Peaks)
Key Points:
- Reviewing the market structure during the dual peaks of 2021
- Discussion from three perspectives: URPD, STH-RP, Realized Profit
- Will the dual peak structure of 2021 reappear?
Definition of a Peak?
Before discussing today’s topic, we need to define “what constitutes a peak.”
In April 2021, the BTC price dropped from around 65k, with a maximum decline of about 55%; if you consider “this is the peak,” then escaping at that time would have been a rational decision; if you believe “the second peak is the peak,” then it was indeed unnecessary to escape in April.
My personal view is: the peak was indeed in April. No commodity market’s beta experiences a decline greater than 55% after reaching its peak. From the perspective of on-chain data, several peak signals had already appeared before April 2021; as for how to view the second peak of 2021, I will share my own bias later in the text.
Data Review of the 2021 Dual Peaks
Realized Profit
For ease of observation, I present Realized Profit in a 7-day moving average:
At the first peak of 2021, Realized Profit issued a very clear warning signal: divergence. As shown at the three blue marked points, as the price rose higher, Realized Profit actually decreased.
In the second peak of 2021, a massive amount of Realized Profit appeared again, but it is worth noting: the volume is not as large as in 2021, relatively smaller.
STH-RP (Average Cost of Short-Term Holders)
STH-RP has always been one of the data points I closely monitor, as this data holds high value for tracking market conditions: on one hand, it allows us to deduce possible market sentiment through the relationship between price and STH-RP; on the other hand, it can also be combined with technical analysis to assist in finding support and resistance.
The above chart shows the STH-RP during the dual peaks of 2021. We can first observe the “red marked points”: regardless of whether it is the first peak or the second peak, once the price falls below STH-RP, it essentially signifies the “right-side signal of a bear market beginning.”
The reason is: if the market is very close to the peak (the distribution of low-cost chips is nearing its end), the proportion of high-cost chips in the market will increase, leading to a shift in dominant forces. Once the price falls below STH-RP (the average cost of short-term holders), due to the higher proportion of high-cost chips in the market, they are not as resolute as low-cost chips, leading to looseness and selling, significantly increasing the possibility of a chain reaction of declines!
In other non-peak periods, we can see that STH-RP plays a strong role as a support and resistance level, which is why I place great importance on “whether the market has the conditions for peak formation.”
Chip Structure
Chip structure can be said to be the biggest divergence between this cycle and previous peaks. Based on my interpretation of the current data, I believe the market has the conditions for peak formation; however, the only peculiar point is that “the chip structure is completely different from before.”
The above chart shows the chip structure at the first peak of 2021, where the accumulation at the peak was relatively small, and a large number of low-cost chips had yet to be distributed, with chips at a cost below 19k still in a clearly accumulated state, amounting to 8.6282 million pieces.
In contrast, the chip structure at the second peak of 2021 reveals two core differences compared to the first peak:
- Large-scale distribution of chips below 19k
- High-priced chips were more spread out, unlike the concentration at the first peak
Will the Dual Peak Structure of 2021 Reappear?
Many people ask: “Will this cycle produce a dual peak similar to that of 2021?” To be honest, no one can predict the price trend; trading itself focuses more on planning and simulating scenarios.
If a dual peak structure similar to 2021 does occur in the future, there will inevitably be signs of a “phase bottom” emerging between the two peaks (similar to July 2021), and at that time, there will surely be data signaling this.
That’s all for today’s sharing. I hope it helps you. Thank you for reading.