Bitcoin on-chain metrics suggest possible further declines, according to a recent report by CryptoQuant. Despite these indicators, Bitcoin whales are accumulating at the fastest rate seen in over a year. The Profit and Loss (P&L) index currently hovers around its 365-day moving average (MA). CryptoQuant warns that a drop below this MA could trigger a significant correction, reminiscent of downturns in previous cycles.
“A crossover to the downside has been associated with major corrections (May-July 2021) or the start of a bear market (November-December 2021),” the report states, highlighting historical trends.
CryptoQuant’s bull-bear market cycle indicator also approaches a critical threshold. If it dips below the neutral line, it could signal the onset of a bear market, akin to past cycles observed in March 2020, May 2021, and November 2021. This shift could potentially lead to further price declines. Adding to the uncertainty, Tether’s (USDT) market cap growth has stalled. CryptoQuant notes that historical Bitcoin recoveries often coincide with increased stablecoin liquidity, particularly from USDT minting.
Whale Accumulation Amid Bearish Signals
Despite these bearish indicators, Bitcoin whales have been aggressively accumulating during the recent price dip. Large holders increased their Bitcoin holdings by 6.3% over the past month, marking the fastest accumulation rate since April 2023. This trend indicates rising demand for Bitcoin at lower price levels, mirrored by increased inflows into US spot Bitcoin exchange-traded funds (ETFs). The ETFs saw $143.1 million in inflows on July 5, despite a drop to four-month lows. This was followed by $294.9 million and $216.4 million in net inflows on July 8 and July 9, respectively.
Market Sentiment and Future Outlook
The mixed signals from on-chain metrics and whale accumulation present a complex picture for Bitcoin’s future. On one hand, the P&L index and the bull-bear market cycle indicator suggest caution. A significant downturn could be on the horizon if these metrics cross critical thresholds. On the other hand, the aggressive accumulation by Bitcoin whales and the substantial inflows into Bitcoin ETFs suggest a strong underlying demand for the cryptocurrency at current price levels.
Conclusion
As Bitcoin navigates this uncertain landscape, investors will need to closely monitor both on-chain metrics and market behavior. The potential for further declines remains, especially if key indicators drop below critical levels. However, the continued accumulation by whales and robust ETF inflows indicate a resilient demand that could support Bitcoin prices. The coming weeks will be crucial in determining whether Bitcoin will face a significant correction or if the demand from large holders will help stabilize and potentially boost its value.
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