The Bitcoin market has seen some choppy movements in recent weeks, with on-chain data revealing shifting dynamics among long-term holders and short-term traders. While some of the blockchain metrics are raising eyebrows about a potential bull market top, analysts believe the flagship crypto may just be going through a period of consolidation before continuing its rally.
Data from crypto analysts at CryptoQuant shows a steep drop in BTC holdings among long-term investors, or “whales,” since the launch of the first spot Bitcoin ETF earlier this year. Historically, such declines from long-term holders have signaled the top of bull runs as they move to take profits.
However, the firm notes one key difference this cycle – the coins don’t appear to be flowing onto exchanges for selling like in years past. CryptoQuant points to the massive over-the-counter buying from BlackRock, which has emerged as potentially the biggest single buyer following the ETF approval.
CryptoQuant explained:
One significant reason for this is that BlackRock, which has been buying the most Bitcoin since the ETF approval, is active over-the-counter (OTC). As a result, despite the sharp decline in Bitcoin holdings by long-term holders after the ETF approval, unlike in the past, they are not being deposited into exchanges.
The concerns arise from data showing BlackRock’s net inflows of Bitcoin have dropped to record lows in recent weeks. If this persists, it could force long-term holders to eventually deposit coins onto exchanges to take profits, increasing selling pressure.
If that happens, the likelihood of price dumping increases, CryptoQuant warns. It’s important to pay attention to both BlackRock’s net inflow movements and the movements of Bitcoin deposits into exchanges.
Bitcoin Short-Term Holder
Previously, as from last week, CryptoQuant’s data indicated significant profit-taking from short-term Bitcoin holders on March 13th. The spent output profit ratio (SOPR), an on-chain metric measuring profit realization, spiked in a movement typically only seen at bull market tops every few years.
However, CryptoQuant notes that with the new Bitcoin ETF and expected inflows, “it is difficult to judge it as simply a signal of the peak of a bull market.” The firm believes “it’s very likely that we will see a strong further bull in 2024” after some consolidation.
So while long-term holder movements are raising yellow flags, many analysts still see the current Bitcoin uptrend continuing, potentially driven by increasing institutional adoption. But close monitoring of exchange flows and whale activity will be critical in the weeks ahead.
