Bitcoin is at a “critical juncture” as several on-chain metrics signal further declines, and whales are experiencing their fastest Bitcoin accumulation rate in a year, according to a new CryptoQuant report.
Bitcoin (BTC) has been in a downtrend since breaking out of its new all-time high in March. Bitcoin’s price action over the past month has been characterized by a series of lower highs and lower lows, reaching a two-month low of $53,500 on July 5.
Despite the bounce above $57,000, there are concerns about further losses in BTC due to the German government’s continued Bitcoin sell-off and the Mt. Gox redemption.
The CryptoQuant report states that the Profit and Loss (P&L) Index is hovering around its 365-day moving average (MA). The on-chain data provider explains that if this index falls below 365-day, Bitcoin could be headed for a major correction like the one seen in previous declines.
“A crossover to the downside is associated with a major correction (May-July 2021) or the start of a bear market (November-December 2021). See red circle.”
CryptoQuant’s Bitcoin Bullish-Bearish Market Cycle Indicator is also approaching a critical level, indicating that “further price declines could lead to a bearish turn.”
The chart below shows that this indicator is currently moving in a similar fashion to March 2020, May 2021, and November 2021. A drop below the neutral line indicates that the market has entered a bearish phase, suggesting further declines.
According to CryptoQuant, these two indicators show that Bitcoin is at a level where “either a local bottom is forming or a major ‘Summer 2021’ style correction could occur.”
CryptoQuant also added that Tether (USDT) market cap growth has stalled, suggesting a rally could be difficult as historical recoveries could be attributed to increased stablecoin liquidity. USDT market growth is often seen as a key driver of bull markets.
“USDT market cap is still declining. Bitcoin price usually rises as more liquidity flows into the crypto market through USDT minting, but this condition has not yet been met.”
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Meanwhile, Bitcoin whales have been buying aggressively as the recent downtrend gives large holders an opportunity to buy more on the dip, increasing their stack by 6.3% over the past month, the fastest pace since April 2023.
CryptoQuant said this indicates “increased demand for Bitcoin” at lower levels, evidenced by increased inflows into U.S.-based spot Bitcoin exchange-traded funds (ETFs).
According to data from SoSo Value, institutional investors poured $143.1 million into spot Bitcoin ETFs on July 5, despite the BTC price hitting a four-month low. This was followed by net inflows of $294.9 million and $216.4 million on July 8 and July 9, respectively.
This institutional support has helped offset selling pressure while demonstrating BTC’s acceptance within the financial mainstream.
From a technical standpoint, Bitcoin’s short-term resistance level is at $59,000, which is accommodated by the 200-day simple moving average, as observed by Benjamin Cowen, founder of the “Into The Cryptoverse” newsletter.
The price has been stuck below this level since breaking it on July 4th, and the bulls had to turn it back into support to avoid further losses.
“This is the 200D SMA and also matches the backtest of the trendline that BTC broke.”
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