- Analysts note a drop in illiquid supply ratio as dormant Bitcoins move, hold a short-term bearish outlook.
- Bitcoin balance on exchanges spikes, largest single-day inflow since "Black Thursday," likely to trigger a mass sell-off.
- Decrease in holdings of whales’ Bitcoin wallet addresses observed, likely meaning whales are waiting to begin accumulating.
Historically, an increase in Bitcoin inflows to exchanges – an activity being observed now – comes before a price dip. Analysts fear further consolidation in the asset before it resumes an uptrend.
Bitcoin sell-off may have commenced with largest inflow since "Black Thursday"
On August 23, analysts observed the most significant spike in Bitcoin exchange inflow since May 2020. The event dubbed "Black Thursday" was a sudden collapse in BTC price as it nearly halved within a single day. A sudden drop in prices triggered several forced liquidations adding to the selling pressure on exchanges.
Over the past 36 hours, inflow of Bitcoin to exchanges and net flow of Bitcoin on exchanges, both metrics indicate that the BTC wallet balance on exchanges is up. These indicators are considered a precursor of a sell-off event.
Historically, large Bitcoin inflows to exchanges signal that large wallet addresses are gearing up to offload part of their BTC holdings and take profits.
Dino Ibisbegovic, an analyst at Santiment, a behavior analytics platform, recently shared an update on the massive exchange inflow of BTC in a YouTube video. Ibisbegovic states:
On-chain analysts believe that spikes in exchange inflow and exchange flow balance point to a period in time where addresses are looking to claim some of their profits, reduce their exposure, and this is obviously happening right as Bitcoin broke $50,000.
Lark Davis, an independent Bitcoin analyst and YouTube content creator, shares Ibisbegovic's bearish outlook on Bitcoin. Davis tweeted:
#bitcoin inflows to exchanges on the rise, this often comes before a price dip. So far the market is absorbing the sell pressure with price only down a few percent. pic.twitter.com/EDjnJopEmB
— Lark Davis (@TheCryptoLark) August 25, 2021
Bitcoin's illiquid supply ratio is another top indicator that analysts consider when making a price prediction. The ratio is obtained by dividing illiquid supply (supply held dormant in Bitcoin wallet addresses by entities known to hold rather than sell) by liquid and highly liquid supply (supply owned by entities that sell on a frequent basis). A decrease in the illiquid supply ratio is indicative of increased selling from Bitcoin holders.
William Clemente, lead insights analyst at Blockware Team, a blockchain solutions and mining company, recently commented on the drop in illiquid supply ratio and his bearish outlook.
I am short term bearish.
— Will Clemente (@WClementeIII) August 25, 2021
Drop in Illiquid Supply Ratio and coins moving onto exchanges. Also seeing some selling from whales. pic.twitter.com/nRhdB2GuSp
If whale accumulation begins again at the current price level, Bitcoin may resume its uptrend. However, it is currently unlikely since the asset failed to overcome resistance. FXStreet analysts have predicted a correction in Bitcoin's price to $47,000.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
Celebrity meme coins controversy continues amid Pump.fun revenue dominance
Pump.fun outperformed the Ethereum blockchain on Tuesday after raking in $1.99 million. Following this achievement, a meme coin based on actress Sydney Sweeney was the subject of controversy after its developers dumped their bags on investors.
PEPE's on-chain metrics indicate potential rally after weeks of silence
PEPE has struggled to see any significant price move after reaching an all-time high in May. Increased adoption rate and low MVRV ratio indicate a bullish run may be on the horizon. A single PEPE outflow from Binance worth $14.7 million gives credence to signs of bullish expectation.
Ethereum has failed to overcome key resistance despite bullish sentiment surrounding ETH ETF
Ethereum (ETH) is down more than 1.4% on Tuesday following another ETH sale from the Ethereum Foundation. Meanwhile, crypto exchange Gemini's recent report reveals that ETH ETF could see about $5 billion in net inflows within six months of launch.
Crypto community blasts Polkadot following report of treasury spending
Polkadot reports $87 million of treasury spending during H1. Crypto community members expressed harsh feelings toward the DOT team's high spending. DOT is up more than 2% in the past 24 hours but risks correction following the report.
Bitcoin: BTC price correction could end in July, according to seasonal data
Bitcoin (BTC) price appears poised for a decline this week, influenced by slight outflows in US spot ETFs, selling activity among BTC miners, and a combined transfer of 4,690.28 BTC to centralized exchanges by the US and German governments.