Bitcoin (BTC) is at a “pivotal point'' as several onchain metrics signal further downside while whales experience the fastest BTC accumulation rate in more than a year, according to a new CryptoQuant report.
Bitcoin has been in a downtrend since turning away from its new all-time high in March. Over the last month, Bitcoin’s price action has been characterized by a series of lower highs and lower lows, reaching a two-month low at $53,500 on July 5.
Despite rebounding back above $57,000, continued Bitcoin selling by the German government and Mt. Gox repayments threaten further losses for BTC.
The CryptoQuant report reveals that the profit and loss (P&L) index is hovering around its 365-day moving average (MA). The onchain data provider explains that if this index drops below its 365-day, Bitcoin could embark on a major correction as those seen in previous drawdowns.
“A crossover to the downside has been associated with major corrections (May-July 2021) or the start of a bear market (November-December 2021). See red circles.”
CryptoQuant’s Bitcoin bull-bear market cycle indicator is also approaching a critical level and could “switch to bear market if prices decline further.”
The chart below shows that the indicator is currently playing out in a similar way it did in March 2020, May 2021 and November 2021. A drop below the neutral line will mean that the market has switched to a bear phase, pointing to further declines.
According to CryptoQuant, these two metrics show that Bitcoin is at “a level where a local bottom can form or a major “summer-of-2021” style correction can occur.”
In addition, Tether USD’s (USDT) market cap growth has stalled, suggesting that a rally might be hard to come by as historical recoveries can be attributed to a rise in stablecoin liquidity, CryptoQuant added. Growth in the market of USDT is often considered a key driver of bull markets.
“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.”
Related: Price analysis 7/10: BTC, ETH, BNB, SOL, XRP, DOGE, TON, ADA, AVAX, SHIB
Meanwhile, Bitcoin whales have been aggressively accumulating as the recent downswing gave large holders an opportunity to buy more on the dip, boosting their stack by 6.3% over the past month, the fastest pace since April 2023.
CryptoQuant says that this indicates “rising demand for Bitcoin” at lower levels. This is corroborated by increased inflows into US-based spot Bitcoin exchange-traded funds (ETFs).
Data from SoSo Value shows that despite BTC's price drop to four-month lows on July 5, institutional investors poured $143.1 million into spot Bitcoin ETFs that day. This was followed by $294.9 million and $216.4 million net inflows on July 8 and July 9, respectively.
This institutional support has counterbalanced the selling pressure while simultaneously demonstrating BTC’s acceptance within the financial mainstream.
From a technical perspective, Bitcoin’s short-term resistance rests at $59,000, embraced by the 200-day simple moving average, as observed by Benjamin Cowen, the founder of Into The Cryptoverse newsletter.
Note that the price has been sealed below this level since breaching it on July 4, and bulls were required to flip it back into support to avoid further losses.
“This is the 200D SMA and would also correspond to a backtest of the trend line that BTC broke down from.”
