Recent on-chain analytics suggest that Bitcoin may be entering two significant phases in the ongoing market cycle, which could influence the price trajectory of this crypto asset in the upcoming weeks.
Identifying Bitcoin’s Accumulation And Distribution Phases
The capital flow of Bitcoin on the blockchain is uncovering areas of Accumulation and Distribution, shedding light on investor behavior as detailed by Alphractal, an advanced data analytics platform for investments, in a recent update on X (previously known as Twitter).
It’s important to highlight that during accumulation phases, large holders and long-term investors typically increase their Bitcoin positions, characterized by significant activity and a strong belief in future price appreciation. In contrast, distribution phases see these holders sell a portion of their assets, often resulting in market corrections and increased volatility.
The platform formulated its analysis after looking into Bitcoin’s On-chain CapFlow Sentiment Index metric. This crucial indicator evaluates the realized capitalization of BTC through a blend of momentum and stochastic indicators, as well as various on-chain oscillators.
The platform asserts that this indicator has been effective in identifying regions within the network where coin flow momentum diminishes, signaling distribution by knowledgeable investors. Alphractal believes this phenomenon also happens during accumulation phases, which aligns with local bottoms.
Moreover, the platform pointed out that following a distribution phase in 2024, Bitcoin has yet to achieve new all-time highs. However, a scenario reminiscent of 2017, where three distinct phases were observed, could potentially recur.
Consequently, Alphractal emphasizes the critical nature of monitoring this metric and determining whether new demand is emerging, as the opposite trend could lead to a decline in the metric, possibly resulting in a drop in Bitcoin’s price.
Is BTC Regaining Its Former Momentum?
Amid several positive developments in Bitcoin’s on-chain activities and metrics, there is potential for the crypto asset to reclaim its prior upward momentum, where BTC surged from the $59,000 mark to nearly $70,000 in the preceding week.
BTC climbed to around $68,693 late Thursday. However, today, the crypto asset has fallen below $67,500. While this may have raised some concerns, Bitcoin is showing resilience, firmly holding the $67,300 support level.
The short-lived drop may be attributed to a lack of bullish activity, highlighted by a decrease in trading volume, which has dipped over 11% in the last 24 hours. If bulls regain market control, BTC could gather enough momentum for a price recovery, with the $70,000 level emerging as a significant area to monitor.
Featured image from Unsplash, chart from Tradingview.com
