Key Points
Bitcoin’s Exchange Inflow Volume Increases
Recently, there has been an increase in the exchange inflow volume from long-term holders of Bitcoin (BTC). This increase indicates that these investors might be taking profits. The leading cryptocurrency, Bitcoin, could face a short-term price correction as on-chain data shows a shift of coins from long-term holders to short-term holders.
CryptoQuant analyst Yosei Dent recently analyzed Bitcoin’s exchange activity. He found that when Bitcoin’s price surpassed the $51,000 mark on February 14th, there was a surge in the quantity of long-held Bitcoins transferred to exchanges. Dent noted, “As soon as BTC breached the $51k mark on the 14th, 5,153 BTC from the 6m-12m age band were inflowed into exchanges.”
Investors Taking Profits
According to Dent, the Bitcoin holders in this group purchased their coins during the 2023 bull market run. This run began in October and pushed Bitcoin’s value to close the trading year at a multi-month high of $42,000. On the same day, the exchange inflow volume from coin holders who have held their Bitcoins for three to five years briefly rose to 2,123 BTC.
Dent states that most of these investors bought their coins during the bull run from 2019 to 2021. The recent surge in exchange inflow volume from these investors suggests they are taking profits. Dent commented, “Considering that the BTC price was at $48k on February 14, 2021, it seems that a portion of the 3y-5y cohort investors may have exited the market at their break-even point.”
Price Pull-Back Possibility
When Bitcoin experiences an increase in exchange inflow from these investor cohorts, it indicates that coins are moving from long-term holders to short-term holders. This movement is often followed by a price pull-back, as short-term holders, often referred to as “weak hands,” are ready to sell at any hint of negative sentiment. However, Dent pointed out that compared to the long-term holder exchange inflow in previous cycles, this scale is relatively small.
At the time of writing, Bitcoin was trading at $51,245, according to CoinMarketCap. In the last month alone, its value has increased by almost 30%. Of all the addresses holding Bitcoin, 92.23% are deemed to be “in the money,” meaning they currently hold the leading asset at a profit.
On the flip side, 5% of holders, made up of 2 million addresses, are currently holding their Bitcoins at a loss. These holders bought their coins when Bitcoin was trading between the $52,000 and $67,000 price range.
