Ki Young Ju, CryptoQuant CEO and on-chain analyst, says that Bitcoin (BTC) shows a trend from neutral to short-term bearish at the moment.
There are two main indicators that have been helpful in spotting trend changes in the current bull cycle.
First, every time the Coinbase premium appeared, meaning that BTC is trading higher on Coinbase than on Binance, for example BTC experienced bullish momentum. Second, Bitcoin’s momentum strengthened when it saw large exits from Coinbase.
In the last days, however, neither of these two indicators has shown any staying power, as the metric fell into negative territory on January 24.
When will sentiment improve in the Bitcoin market again?
Most likely Bitcoin finds renewed bullish momentum if the premium on Coinbase appears consistently alongside large exits from the exchange.
The combination of these two indicators I would suggest that high net worth individuals are hoarding Bitcoin once again. Ki explained:
“I will maintain my bearish bias until there is a significant premium from Coinbase and exits from the exchange. $ BTC needs US dollar spot inflows from institutional investors to start the next bull run. “
The popular narrative around Bitcoin’s recent rally is that institutional investors and high net worth individuals are collecting BTC at every price drop.
In addition to the two indicators related to Coinbase, Stablecoin deposits are another important metric that could signal that a new rally is brewing.
Ki pointed out that stablecoin deposits on exchanges are often a powerful on-chain signal for a rally because it shows the inflow of marginalized capital into the cryptocurrency exchange market.
For example, when stablecoin deposits soared on January 22, BTC proceeded to rally around 6% in the next 24 hours. Ki said:
“This indicator is one of the most powerful on-chain signals with a fairly good hit rate. You can predict an instantaneous rise in the short term, regardless of the general market trend. It is the amount of stablecoin deposits on all exchanges, which means that investors try to send stablecoins to exchanges to buy cryptocurrencies. For example, if this value reaches 80, we can assume that 80 people are trying to deposit in an exchange in a single block, in 15 seconds “.
How low can BTC fall?
In the foreseeable future, If Bitcoin continues to move sideways, some traders are forecasting BTC to drop as low as $ 27,000.
A pseudonymous merchant known as “CJ” shared a potential scenario where BTC could mark a bottom near $ 26,000 or $ 27,000.
However, even in the worst case, analysts generally do not see the price of Bitcoin revisiting the zone below $ 20,000. The trader wrote:
“This channel could be precisely what prevents a retest of $ 20,000. Based on this chart, the sweet spot for a drop is between $ 23,000 and $ 27,000. “
Although short-term on-chain indicators point to a slightly bearish outlook, they do not point to the likelihood of a deeper correction.
Bitcoin falling back to around $ 20,000, the previous all-time high, would mean a 35% drop from current levels. Such an event seems unlikely, but traders should be aware of a possible black swan event, such as a regulatory crackdown or a high-profile lawsuit against a major player in the industry.