In this important week just passed we have the opportunity to see how the market reacted to this very strong increase in prices. In the presence of such increases, the type of short-term reaction of traders can indirectly give us "bullish" or "bearish" predictions for the medium term. In fact, the market can react defensively, giving a "bearish" forecast, or it can react aggressively, giving a "bullish" forecast.

Metrics tell us that so far the forecast looks bullish. Let's see why.

![image.png](https://i.imgur.com/g7YNuUm.png)

 The first chart shows the profit and loss trends of those who trade short-term (orange color) and those who trade medium-term (blue color). When the curves exceed the value of 1 (red line), it means that the profits of these traders are greater than the losses. Then we notice the dotted path on the right, which passes through stages A, B and C. What do these three stages mean?

- A: The curves, after a long period of continuous losses, break above the red line, indicating that the traders start to make profits.
- B: The relative high point reached by the curves indicates that traders have continued to trade for more profits.
- C: After profit-taking, which causes the curves to fall and prices to fall, traders have reopened positions taking advantage of lower prices, causing the curves to rise above the red line.

Phase C is the one that gives us a "bullish" prediction, because it tells us that traders did not just take profits to compensate for previous losses and exit the market "to forget about it". On the contrary, they have stayed in the market and triggered new trades that support the quotes.

If in the coming weeks the two curves continue to stay above the red line (albeit with the normal ups and downs), the bullish prediction will be confirmed for the long term.

![image.png](https://i.imgur.com/x2M0CNL.png)

The second chart, which we also saw last time on Telegram, represents the flows of the "older" coins, from 3 months onwards (the differences in color of the various waves indicate ages progressively higher than 3 months). 

In the presence of a strong and unexpected increase in prices, the reaction of these coins is suggestive, because if they are mobilized en masse to be sold, they indicate that traders do not have confidence in a continuation of the bull market and take advantage en masse of this unexpected way out.

On the contrary, if these coins remain "dormant", i.e. there are few outflows, it means that traders have confidence in the recovery of the bull market with further increase in prices and therefore keep their coins without selling them.

As you can see, the flows on the right are low, with peaks very reduced, compared to those that are seen in the phases of "capitulation" of the market (towards the center-left of the graph). So also in this case the prediction is bullish, because traders have confidence in the continuation of the bull market and calmly keep their coins in the deposits.

But there is another very important trend to see....

![image.png](https://i.imgur.com/DPHRwui.png)

This chart shows an increase in individual transactions over $1 million.

From September 2020 to now these large transactions are going to dominate the market as they have gone from accounting for only 30% of total transactions to 70% today.
The interesting thing is that right during the bearish phase that brought btc to lows around $29,000, these transactions took advantage of it to buy more coins and thus increase their dominance by another 20%.

Also during this week's rise in quotes, it was transactions of 10 million or more that increased their dominance by 20%, supporting quotes.
You don't need anything else to understand how this trend is actually supported by institutional investors, rather than "popular" participation in cryptocurrencies.
This might seem at odds with the fact that, in these very days, the issue of the infrastructure bill being passed in the US Congress seems to threaten the development of the nascent US crypto sector.

Actually, if we think about it, this law, if confirmed, will be a fast and direct way to legalize all those services that can already comply with the requirements of the measure, i.e. Circle, Paypal and all those operators that already have everything in order, as well as other large or very large operators, such as Amazon, that could enter the market without problems, if they wanted to, having already the necessary structure to quickly comply.

Those that will be penalized are instead other services, such as miners, Defi etc. that were recently entering the country and that would be forced to abandon their projects to find a residence elsewhere (luckily there are plenty of crypto-friendly countries around the world). These metrics, in short, give us indirect confirmation that in the U.S. some big players are rubbing their hands because they see a final legalization approaching in a shorter time than expected. If things go this way, we will have a historical phase in which crypto would become the prerogative of the centralized services, which would develop a bull market specifically made to support their activities.

But the history of crypto is still long.... Sooner or later there will be phases in which the official system will go into crisis (nothing exists forever) and the Defi will take hold, because users will be "forced" to use them en masse to escape from risks that now we cannot imagine.

For the moment, though, let's enjoy the next bull market and remain ever vigilant.

One last note I dedicate to the other event of the week, that is the ethereum update that involves a stabilization of transaction fees ("gas").

![image.png](https://i.imgur.com/8jF9S7x.png)

So far, as the chart shows, the mechanism has led to the programmed destruction of a portion of eth intended for gas. The destruction mechanism has already created a handful of deflationary blocks, indicated by the green lettering.
So far, the average "burn rate" is 0.697 eths per block, or about 35% of the new eths issued.
This is therefore a deflationary mechanism that looks promising for quotations in the medium to long term.

We have an exciting few weeks ahead, let me know what you think of my analysis.

Posted Using [LeoFinance <sup>Beta</sup>](https://leofinance.io/hive-167922/@cryptomaster5/important-update-on-glassnode-s-metrics)