The key on chain metrics to track include the single most important metric in my opinion which is the Bitcoin MVRV Ratio. The goal of this metric is to help determine the actual value Bitcoin could have in the minds of it's holders based on the price average they paid for it. This average price is constantly going up and is already over $20,000. The realized value is basically the best indicator I know of to determine the value Bitcoin has in the minds of holders based upon the subjective theory of value. Other value tracking metrics based on network transactions are less effective in practice so far.
MVRV Z-Score
The MVRV Z-Score gives us a ratio. This ratio lets us know when the realized value and market value diverge. When the market value is far above the realized value we can expect some profit taking to occur. This profit taking is what results in the corrections Bitcoin typically sees. Currently Bitcoin is correcting right before tax time just as it did in March 2020. To learn more about the MVRV-Z.
The Good News - Bitcoin is still bullish
According to the metrics giving the realized price of Bitcoin we can estimate a price floor. The current realized price is over $21,000. The correction brings the current market price closer to the current realized price. This makes Bitcoin more attractive to buy the closer it gets to the realized price and less attractive to sell under the assumption that the majority of sellers will not want to sell for less than they paid for. Of course Bitcoin in a bear market can sell anyway but from what I can see so far we have a healthy correction.
More concerning than the Bitcoin price is the total crypto market cap which fell off a cliff losing over 500 billion dollars. This could be people selling to capture profit. This could be panic sellers. This could be due to taxes. In my opinion this metric is more important than Bitcoin because it gives a snapshot of the overall direction of crypto. The good news is that money can flow back in much faster than in 2017 bear market and this means if it is a correction even 50 or 60% it can recover in a matter of weeks.
Conclusion
The conclusion so far is I expect we will get a bounce and that Bitcoin will range trade within $30,000 to $40,000 for the next few weeks. Nothing in the data indicates that the bull market is over. In fact this correction may extend the bull market because people who wanted or needed to take profits are doing so.