On-Chain Data Suggests Bitcoin Market Weakening

On-Chain Data Suggests Bitcoin Market Weakening

This week, some important on-chain bitcoin (BTC) metrics have flipped bearish, indicating that the top cryptocurrency by market capitalization may suffer from more price losses in the short-term. The net inflow of bitcoin to exchanges, which is measured by the total change that occurs in exchange balances, was around 36,800 BTC on Tuesday. As per data source Chainalysis, this was the biggest rise in a single day since the market crash that had happened on March 13. According to analysts, the net daily inflow of bitcoin to exchanges had been increasing since September 20th and trade had been declining simultaneously. 

According to them, this is an indication of a weakening market. When the net inflows are on the higher side, it is an indication of increase in selling pressure because investors start moving their coins from their wallets to the exchanges because they may see a possible need for liquidating their holdings. In addition, the trade intensity of bitcoin also fell to its lowest in a year on Tuesday, when it reached 1.75. The trade intensity refers to how many times an inflowing coin is traded. This fall in trading intensity indicates that there weren’t enough buyers for absorbing the increasing inflow of coins.

In the last three days alone, there has been a decline in trade intensity from 4.93 to 1.75. Analysts said that exchanges seem to be experiencing an increase in inventory, but there are fewer buyers interested in trading. In such conditions, prices are more likely to fall even further. On Monday, there was a 4.5% decline in the price of Bitcoin, as investors chose to buy the safe-haven U.S. dollar and sold gold, equities and other fiat currencies amidst renewed concerns about the coronavirus. This drop in price set the stage for a continuation of the market pullback from the highs in August of $12,400. According to technical charts, the immediate supports can be seen at $10,000 and $9,868 (the lowest price on September 8th). Currently, Bitcoin is still above the $10,000 mark and this is the third time that it has managed to stay at this price level for several weeks. This shows that long-term investors are purchasing the crypto in large amounts. Bullish bias can also be seen in the options market on the longer time frames. As far as the put-call skews for three and six months are concerned, they still remain zero. This shows that bullish call options are experiencing higher demand and prices, as opposed to bearish put options.

Leave a Reply