On-chain Factors Acting as Local Pressure on Bitcoin

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After Bitcoin hits its all-time high of $69,000 on November 10, 2021, at the Bitstamp exchange rate, it has been in the clutches of bears who have managed to devalue the BTC/USD. Dollar trading pair by almost 22%. On December 4, 2021, the BTC price on most exchanges fell to $42,000; this broke the local bullish structure, which made a considerable number of people doubt the bullish sentiment of Bitcoin traders. Currently, Bitcoin has been under pressure for 48 trading sessions, and several on-chain metrics indicate that the pressure may continue.

UTxO Profit Percent (7DMA)

The meaning according to Glassnode Academy:

UTxO stands for “Unspent Transaction Output.” A UTxO is in profit if the current price is higher than the price when it was created. Conversely, a UTxO is at a loss if the current price is lower than the price when it was created. Percent UTxOs in Profit highlights the percentage of the total set of UTxOs currently in profit. In general, higher values may suggest market tops, while lower values may signal bottoms.

You can check the chart below:

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UTxO Profit Percent (7DMA). Source: CryptoQuant

The chart above uses a non-standard version of the UTxO Profit Percent metric; an additional setting is applied to it in the form of a 7-day moving average to get better signals. You can easily use this setting through the personal account of any blockchain data provider. Around November 18, 2021, the indicator curve broke its first support line (red line), which confirmed the thesis that Bitcoin reached its local peak in the $69,000–64,000 range. 

Further, the indicator curve fell into a transit zone, which indicated the weakness of Bitcoin and the loss of bullish momentum for some time. Finally, on December 3, 2021, the indicator curve broke through its uptrend line, which brought traders tremendous losses since many long positions were liquidated. The indicator is also under a broken uptrend right now, signaling that Bitcoin is still weak and has not recovered.

Bitfinex Exchange Reserve (1h)

As you probably already know, the Bitfinex exchange has been associated with many speculations in the Bitcoin exchange rate in the past. Bitfinex still contains large whales that continue to influence the Bitcoin exchange rate.

You can check the chart below:

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Bitfinex BTC Reserve (1h). Source: CryptoQuant

The chart uses the 1-hour BTC reserve, reflecting that since around December 9, 2021, many Bitcoins have been flowing to Bitfinex; in other words, this is a BTC inflow. As a rule, the inflow of Bitcoins to exchanges is associated with upcoming bearish corrections or at least associated with some expected events that cause uncertainty. The current inflow values are very high, which may be due to the profit taking by the giant whales and the uncertainty around the US monetary policy.

Whale Ratio (72h MA)

The Whale Ratio (72h MA) metric reflects the force of pressure from their side. The lower the indicator value, the lower the pressure, and accordingly, the higher the indicator value, the higher the pressure. Two levels are used to determine the pressure forces. The first pressure level is a line with a value of 0.85. The second level of pressure is a line with a value of 0.90; these two values ​​indicate to traders a relationship of extreme pressure, which suggests a subsequent downward movement. Since December 03, 2021, the ratio of whales has been between the indicated levels, which means high pressure.

You can check the chart below:

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Whale Ratio (72h MA). Source: CryptoQuant

To summarize, based on these on-chain indicators, we can say that retesting the $42,000–40,000 levels is not unreasonable. These on-chain metrics are not the only ones that indicate the current weakness of Bitcoin; for example, according to data from Santiment, whales have sold bitcoins for $1.8 billion recently and are still selling. At the same time, of course, we must understand that another round of decline in Bitcoin is nothing more than a probability, and our task is to respond promptly.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

 


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