Record Inflows into Bitcoin Accumulation Addresses
Following Bitcoin’s surge to its all-time high of $69,000 and subsequent retracement, Bitcoin accumulation addresses are experiencing record inflows. According to a weekly report by CryptoQuant, these addresses have seen daily inflows of 38,000 BTC, resulting in a total holding of 1.5 million BTC.
Strong Demand Indicated by Increased Holdings
Bitcoin accumulation addresses are known for acquiring BTC and never selling. The rise in their digital asset holdings suggests a strong demand for Bitcoin. This increase is in line with the high demand observed from spot Bitcoin exchange-traded funds (ETFs), with all ETFs except GBTC accumulating approximately 360,000 BTC, which represents 1.8% of the total supply.
New Investors Buying from Older Ones
Analysts believe that the crypto market may be entering a phase where new investors are buying from older investors at higher prices. This is reflected in the decline of Bitcoin supply that has not moved in over a year, which currently stands at 68%, down from 70.5% in November 2023.
Potential Risk of BTC Correction
While accumulation addresses and ETFs continue to see record inflows, CryptoQuant has issued a warning about the potential risk of a short-term price correction. According to the platform’s Bull-Bear Market Cycle Indicator, BTC prices have increased too rapidly compared to key on-chain indicators, indicating an overheated-bull phase as BTC surpassed $65,000.
Miners Overpaid and Unrealized Profit Margins High
In addition, Bitcoin miners are currently receiving excessive compensation as indicated by the Miner Profit/Loss Sustainability metric. Mining revenues have been on the rise since December 2023 due to the increase in BTC valuation. Moreover, short-term investors’ unrealized profit margins are currently at 57%, above extreme levels and an increase from the previous week’s 32%. A profit margin of 40% typically signals a price correction, suggesting that these investors may soon contribute to selling pressure. This metric can also indicate a price correction when it falls below its 30-day moving average.
Selling Pressure from Short-Term Investors
Furthermore, some short-term investors have already begun selling their assets to realize profits. CryptoQuant’s analysis reveals that these market participants have been offloading their holdings over the past few days with high-profit margins not seen since February 2021, averaging at 11%. This activity has the potential to trigger significant selling pressure in the crypto market.
🔥 Hot Take: Potential Correction Ahead?
While Bitcoin accumulation addresses continue to see record inflows, there are indications that a short-term price correction may be on the horizon. The rapid increase in BTC prices relative to key on-chain indicators and the overpaid status of Bitcoin miners raise concerns about the sustainability of the current bull phase. Additionally, high unrealized profit margins among short-term investors and their recent selling activity suggest that selling pressure could further contribute to a potential price correction.
It is important for crypto investors to stay informed about these indicators and monitor market conditions closely. While Bitcoin’s long-term prospects remain positive, short-term volatility and corrections are inherent to the cryptocurrency market. As always, conducting thorough research and exercising caution when making investment decisions is crucial for managing risk and maximizing potential returns.
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