Bitcoin has experienced significant price swings in recent months, with highs reaching $73k in 2024. While the introduction of ETFs has garnered greater market interest, it has also brought about increased volatility.
As of the latest update, Bitcoin is currently priced at $54,239 following an 8.42% drop in the past week.
Despite the downtrend, there has been a notable uptick in trading volume, with a remarkable 63.13% surge to $48.6 billion in the last 24 hours. What implications does this have for Bitcoin’s market trajectory in the short and long term? Can Bitcoin stage a full recovery from its current position?
Renowned crypto analyst Ali Martinez has suggested that Bitcoin might be experiencing reduced participation based on the declining accumulation trend score.
Analyzing Market Sentiment
According to Martinez, the accumulation trend score is swiftly approaching zero, indicating that market participants are either divesting or refraining from accumulating more BTC.
The accumulation trend score measures the proportion of entities actively accumulating coins on-chain in relation to their BTC holdings. A score near 1 suggests accumulation, while a score closer to 0 implies distributing assets.
When the accumulation trend score nears 0, it signifies a lack of buyers across all groups and hints at asset distribution. Throughout a bear cycle, BTC typically witnesses increased accumulation following price declines as investors buy the dip. Yet, extended bearish conditions can lead to diminished accumulation due to faltering confidence in the market cycle.
Based on recent analysis, the accumulation score has been approaching 0 from late August to early September 2024, reflecting increased distribution and weakened accumulation among participants. This trend suggests that significant players and long-term investors are refraining from making purchases, signaling a bearish sentiment.
This lack of confidence amid investors concerning the anticipated rally leads to selling pressure, resulting in a downward trend in prices.
Interpreting the Price Charts
While Martinez’s metrics provided insight into prevailing market sentiment, the broader market felt the impact of its recent resurgence.
Bitcoin’s large holder SOPR dropped from 2.4 to 1.6 in the past week, indicating that while long-term holders are selling for profit, the profit margin is diminishing. Consequently, traders are now selling at a loss due to waning confidence in the asset’s short to medium-term outlook.
This scenario suggests growing pessimism among investors regarding potential price increases, as they brace themselves for further bearish scenarios.
Furthermore, Bitcoin’s exchange netflows have generally shown positivity over the past week, with 4 out of 7 days recording positive netflows. This suggests that more investors are gearing up to close their positions, potentially leading to distribution if followed by selling activity.
Considering these factors, it is likely that if selling pressure continues, Bitcoin may face the risk of dropping below the $50k mark.