Bitcoin (BTC) is at a critical juncture, with several on-chain metrics indicating possible further declines, even as whales are accumulating at the fastest rate in over a year, according to a new report by CryptoQuant.
Since reaching a new all-time high in March, Bitcoin has been on a downward trend, marked by a series of lower highs and lows, hitting a two-month low of $53,500 on July 5. Although it has since rebounded above $57,000, ongoing Bitcoin sales by the German government and repayments from the Mt. Gox bankruptcy case pose additional risks.
On-Chain Metrics Signal Potential Downside
CryptoQuant’s report highlights that the profit and loss (P&L) index is currently near its 365-day moving average (MA). If this index falls below the 365-day MA, Bitcoin could experience a significant correction, similar to those seen in previous downturns.
“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 notes.
Moreover, CryptoQuant‘s bull-bear market cycle indicator is nearing a critical threshold. A drop below the neutral line would signal a transition to a bear market, suggesting further price declines.
USDT Market Cap Growth Stalls
Another concerning factor is the stagnation in Tether (USDT) market cap growth. Historically, Bitcoin rallies have been linked to increases in stablecoin liquidity. However, this growth has not materialized, potentially hindering any significant recovery in Bitcoin’s price.
“USDT market capitalization is still slowing down. Bitcoin price typically rallies as more liquidity enters the crypto market via USDT minting, a condition that has still not been met,” CryptoQuant explains.
Whale Accumulation and Institutional Support
Despite these bearish signals, Bitcoin whales have been aggressively accumulating during the recent price dip, increasing their holdings by 6.3% over the past month—the fastest accumulation rate since April 2023. This behavior indicates a rising demand for Bitcoin at lower price levels.
Institutional investors have also shown strong support. Data from SoSo Value reveals that despite Bitcoin’s drop to a four-month low on July 5, institutional investors poured $143.1 million into spot Bitcoin exchange-traded funds (ETFs) on that day. This was followed by net inflows of $294.9 million and $216.4 million on July 8 and July 9, respectively. This influx of institutional capital has helped mitigate selling pressure and demonstrates Bitcoin’s growing acceptance within the financial mainstream.
Technical Analysis and Resistance Levels
From a technical perspective, Bitcoin’s immediate resistance is at $59,000, aligned with the 200-day simple moving average. According to Benjamin Cowen, founder of the Into The Cryptoverse newsletter, Bitcoin has been unable to breach this level since falling below it on July 4. To avoid further losses, bulls must flip this resistance back into support.
In summary, while Bitcoin whales are accumulating, suggesting increased demand at lower prices, several on-chain metrics and external factors indicate that Bitcoin is still at risk of a significant correction similar to the summer of 2021.
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