Bitcoin On-Chain Data Flashes”Dumping Hazards” as Price Holds $22K
As of Tuesday, the BTC exchange reserves were falling, while the stablecoin balances were climbing. That showed that traders are not withdrawing their profits off the trades, so they are ready to spend their stablecoins as soon as the Bitcoin price hits their favorite support targets.
Bitcoin recorded a leading session last week as its price ruptured through the $20,000-resistance amount and went on to log its record high of $24,300 this Sunday. Nevertheless, the rally also pushed the cryptocurrency’s momentum readings into overbought areas, a move that typically follows a downside correction.
The chief executive warned about an indicator called”All Exchange Inflow Mean (144-block MA)” recently venturing into a place that typically precedes a bearish price move. In retrospect, the metric reflects the average of bitcoin deposits across the worldwide cryptocurrency trading platforms.
Released at Tue, 22 Dec 2020 10:39:19 +0000
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The new weeks began under the expected bearish bias. Dealers sold-off their profitable holdings at the local price top, causing BTC/USD to move lower. The opinion also ballooned as the US dollar recovered strength after hitting its two-year low, giving Bitcoin plenty of space to keep moving lower.
Bitcoin targets 20-EMA as price corrects from $23,400-top. Source: BTCUSD on TradingView.com
“When this index hits 2 BTC, it’s very likely to be sideways or bearish,” tweeted Mr. Ju on Tuesday. “It always was sideways since November.”
But many analysts agree that a 30-40 percent correction is normal following an asset rally by more than 150 percent in only three months. As an example, Liesl Eichholz, an analyst at Glassnode — an on-chain data analysis company, said that Bitcoin’s risk/reward ratio stays attractive for investors even as the cryptocurrency trades close to its record high.
“Reserve Risk is used to rate the confidence of long-term holders relative to the amount of BTC; when confidence is high and price is low, Reserve Risk stays low, and there’s an attractive risk/reward to invest,” she wrote.
Bitcoin and stablecoin reserves on all trades. Source: CryptoQuant
Particular on-chain metrics on the Bitcoin graph are flashing”dumping risks,” based on data fetched by Kim-Young Ju of CryptoQuant.
The analyst also raised speculation that dealers will sell-off their lucrative Bitcoin holdings to repurchase them later at lower costs. He envisioned the said possibility using two indicators: the complete sum of Bitcoin and stablecoin reserves on all trades.
Mr. Ju also said that the Bitcoin marker’s strong buying power could offset the bearish pressure incurred by whales.