Dream Back to 2021: A Review of the Two Peaks in 2021
(Background Summary: On-chain Data Academy (9): Market Barometer RUPL (I) – Data Introduction for Bottom Fishing Applications)
(Background Supplement: On-chain Data Academy (10): Market Barometer RUPL (II) – Strongest Peak Signal Detailed Analysis of Historical Cycles)
Key Points:
- Review of the market structure during the double peaks of 2021
- Discussion from three perspectives: URPD, STH-RP, Realized Profit
- Will the double 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 price of BTC fell from around 65k, with a maximum decline of about 55%. If you believe “this is the peak,” then escaping at that time would be a reasonable decision; if you believe “the second peak is the real peak,” then there was indeed no need to escape in April.
My personal opinion is: April at that time was indeed the peak. No commodity market has a beta that drops more than 55% after reaching a peak. From the perspective of on-chain data, several peak signals had already emerged before April 2021. As for how to view the second peak of 2021, I will share my own bias later.
Data Review of the Double Peaks in 2021
Realized Profit
For ease of observation, I present Realized Profit in the form of a 7-day moving average:
During the first peak of 2021, Realized Profit showed a very obvious warning signal: divergence. As indicated by the three blue markers in the chart, as the price rose higher, Realized Profit actually decreased. In the second peak of 2021, there was again a massive amount of Realized Profit, but it is worth noting that the volume was not as high as in 2021, relatively smaller.
STH-RP (Short-Term Holder Average Cost)
STH-RP has always been one of the key data points I closely monitor, as it holds significant value for tracking market conditions. On one hand, the relationship between price and STH-RP can be used to infer potential market sentiment; on the other hand, it can be combined with technical analysis to identify support and resistance.
The above chart shows the STH-RP during the double peak period of 2021. We can first observe the “red markers”: whether at the first peak or the second peak, once the price falls below STH-RP, it essentially signals the “right-side signal of a bear market opening.” The reason is that if the market is very close to the peak (distribution of low-cost assets nearing the end), the proportion of high-cost assets 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 assets, they are not as steadfast as low-cost assets, causing a loosening and sell-off, significantly increasing the likelihood of a chain decline!
In non-peak periods, we can see that STH-RP acts as a strong support and resistance level, which is why I place great importance on “whether the market has the conditions necessary for a peak formation.”
Capital Structure
The capital 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 already has the conditions for a peak formation; however, the only peculiar point is that “the capital structure is completely different from before.”
The above chart shows the capital structure during the first peak of 2021. At that time, the accumulation at the peak was relatively small, and a large number of low-cost assets had yet to be distributed, with costs below 19k remaining in a clearly accumulated state, totaling up to 8.6282 million units.
Comparing the capital structure of the second peak of 2021 with the first peak, we can identify two core differences:
- Assets below 19k were largely distributed
- High-priced assets were diluted, less concentrated than at the first peak
Will the Double Peak Structure of 2021 Reappear?
Many people ask, “Will this cycle produce a double peak similar to that of 2021?” Honestly, no one can predict price movements; trading itself is more focused on planning and inferring scenarios. If a structure similar to the double peaks of 2021 really appears in the future, there will inevitably be signs of “phase bottoming” between the two peaks (similar to July 2021), and there will also be data providing signals at that time.
That’s all for today’s sharing. I hope it is helpful to you. Thank you for reading.