Bitcoin [BTC] has faced challenges in the last couple of months, but this is not an unusual occurrence. Breaking the psychological barrier of $100k was no easy task. Even when it seemed like the bulls had managed to turn it into a support level, the bears found a way to push the price down.
As per a recent update on X (formerly Twitter), BTC’s downturn in January following the halving has typically been a recurring pattern. If history repeats itself, March could see Bitcoin trading around the $130k mark.
Besides analyzing historical price movements, monitoring the flow of BTC into and out of centralized exchanges provides valuable insights into market participants’ behavior. Recent data suggests that short-term investors have been selling off their holdings, but this selling pressure is expected to ease, potentially supporting Bitcoin’s recovery.
Positive Signals from Price Movements and Exchange Trends for Bitcoin
The 30-day moving average of Bitcoin inflows into exchanges has been steadily declining since reaching a peak in early December. This decline has brought the 30 DMA to levels last witnessed in October and June 2024.
In June, BTC was hovering around the $60k mark amidst a descending channel formation. By October, it had broken out of this channel but struggled to surpass the $70k resistance level. The decrease in inflows while Bitcoin consolidated below $100k signals a bullish trend.
Similarly, the netflows (the variance between inflows and outflows) have been trending downwards. The 30 DMA for netflows has mostly been negative since March 2024, with a brief period of positive flows in mid-May.
A comparison of recent flow trends with past cycles reveals that the sustained period of negative netflows (or outflows) seen currently is unprecedented. While negative netflows were observed from late August to the final week of November in 2020, the outflows in the last eleven months significantly surpass the previous cycle’s three-month outflow period.
Consequently, it seems reasonable to infer that there is heightened bullish sentiment surrounding Bitcoin at present.
Although this may not result in equally substantial price surges, it is probable that long-term investors will react with less panic and in smaller volumes during sharp pullbacks. This could help mitigate the extreme volatility and steep declines typically associated with a Bitcoin bull market.