Bitcoin price action has been muted over the past few days, hovering between the $90,000 and $88,000 levels. Classically, periods of consolidation often precede major moves up or down in the market.
This raises questions about the future trajectory of the flagship cryptocurrency. The latest on-chain assessment has made a positive prediction about the next direction of Bitcoin’s price.
Demand accumulation rates have reached an all-time high
In a Quicktake post on CryptoQuant, network analyst CoinNiel hypothetically that the Bitcoin price may be at the beginning of a bullish trend. Market Value based this forecast on two metrics – battery address demand and liquidity stock ratio (month).
The Accumulator Address Demand indicator monitors the net buying pressure coming from addresses that are buying Bitcoin consistently and without significant selling. This behavior (buying and infrequent selling) is typical of large-scale Bitcoin holders, commonly known as whales.
Notably, CoinNiel also pointed out that when larger withdrawals from exchanges occur, they are rarely instigated by retailers, but by whales. Therefore, as Bitcoin whales withdraw their holdings from exchanges, their purchasing pressure translates into an escalate in demand for the accumulator address.
From the chart above, the indicator has reached an all-time high. According to a cryptocurrency expert, this could mean that whales are currently experiencing intense levels of “fear of missing out.”
The second indicator, liquidity stock ratio (month), also strengthens CoinNiel’s bullish outlook. This metric tracks and compares existing demand for Bitcoin with the supply available on exchanges, showing whether demand is likely to exceed available supply.
When this ratio increases rapidly, it is usually a sign that demand is eating up the newly created supply. According to the data shared by the analyst, the Liquidity Stock Ratio has also reached the extreme value of 3.8.
However, this extreme reading is only a reflection of what is happening on the US stock exchanges. As a result, CoinNiel suggested that for the first time in years, US exchanges are seeing exceptionally high demand relative to available coins.
Theoretically, a reading of 3.8 means the inevitability of a supply shock in a scenario assuming prevailing conditions. However, the analyst stressed that this would not necessarily happen, as a reading of 3.8 is a sign of increased demand for whales rather than a reliable way to predict supply shocks.
The overall picture, especially when you look at these two indicators together, seems clearly hopeful. This is because available data indicates that the whales are likely positioning towards what could be a resumption of Bitcoin’s bullish price trajectory.
Bitcoin price at a glance
At the time of writing, Bitcoin is valued at $88,520, reflecting a decline of over 1% in the last 24 hours.
Featured image by DALL.E, chart from TradingView
