Key Points
- Bitcoin’s on-chain metrics suggest a potential market peak, with increased selling activity.
- Charles Edwards of Capriole Investments highlights several indicators of market exhaustion.
Bitcoin’s recent on-chain metrics are hinting at a possible market top, resembling cycle peaks of previous years.
Increased selling activity has been noticed, which is in line with historical trends.
Bitcoin’s Market Downturn
At the time of writing, Bitcoin was experiencing a downturn, reversing its previous rally above $63,000. Over the past week, the cryptocurrency has seen a 1.1% drop, with a more significant 2.7% decline in the last 24 hours, bringing its trading price down to $60,929.
In light of these market movements, Charles Edwards, the founder of Capriole Investments, has suggested that various on-chain metrics indicate a potential weakening in Bitcoin’s market strength.
Indicators of Market Exhaustion
Edwards pointed to several on-chain indicators that might suggest market exhaustion. One significant indicator is the behavior of Bitcoin’s Long-Term Holder (LTH) inflation rate, which Glassnode monitors.
The LTH inflation rate measures the annualized rate at which long-term holders are selling their Bitcoin compared to new coins mined. This rate has seen a sustained increase over the past two years. Currently, it is near a critical mark historically associated with market tops.
Edwards noted that the LTH market inflation rate nearing the 2.0 nominal inflation rate often signals a cycle peak. At the time of writing, Bitcoin was very close at 1.9.
Another crucial metric discussed by Edwards was the Dormancy Flow, which assesses the value of spent coins relative to their age and the overall transaction volume.
Recent data has shown a sharp rise in the Dormancy Z-score, particularly in April 2024, implying that older coins are moving at a rate suggestive of a cycle top.
The Dormancy Flow Z-score suggests that Bitcoin’s price might be peaking for this cycle, as it appears overvalued based on transaction volumes of older coins. This could potentially indicate a broader market downturn.
Furthermore, spikes in Bitcoin’s Spent Volume, particularly from coins 7–10 years old, often indicate the top of a cycle due to increasing market risk.
Edwards noted a significant increase in Spent Volume in 2024, describing the movement of an unprecedented amount of Bitcoin on-chain as extraordinary.
He also mentioned that over $9 billion worth of Bitcoin from dormant accounts over ten years old has been mobilized, primarily associated with the settlement activities of the defunct Mt. Gox exchange.
Market Perspectives
While Charles Edwards highlighted potential weaknesses in Bitcoin’s price, other perspectives exist.
Analyzing BTC’s short and long liquidation leverage on Coinglass, data revealed that the majority of liquidations over the past 30 days have been long positions. This suggests that many traders anticipate a rise in Bitcoin’s value.
Whether these long positions will prove profitable for the traders or if Bitcoin’s price will continue to decline, affirming Edwards’ perspective, only time can tell.
Meanwhile, a recent report from AMBCrypto suggested a positive shift in miner activity. Specifically, there has been a notable increase in miners’ reserves, which could potentially bolster Bitcoin’s price.
