Bitcoin price action has been muted over the past few days, trading between $90,000 and $88,000. Classically, periods of consolidation often precede major upward or downward movements in the market.
As such, questions arise about the next trajectory of the flagship cryptocurrency. A latest on-chain assessment offered a positive prognosis for the next direction of Bitcoin price.
Accumulation Demand Metric Hits All-Time High
In a Quicktake article on CryptoQuant, on-chain analyst CoinNiel speculated that the price of Bitcoin could be at the start of an uptrend. The market quant based this prediction on two metrics: accumulator address demand and liquidity inventory ratio (months).
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The Accumulator Address Demand metric monitors net buying pressure from addresses that buy Bitcoin consistently and without any significant selling. This behavior (buying and rarely selling) is typical of large-scale Bitcoin holders, commonly known as whales.
Notably, CoinNiel also pointed out that when large withdrawals from exchanges occur, they are rarely instigated by retailers, but by whales. So when Bitcoin whales withdraw their holdings from exchanges, their buying pressure translates into an increase in demand for accumulator addresses.
According to the chart above, the indicator has reached an all-time high. According to the cryptography expert, this could be a sign that whales are currently experiencing, at intense levels, the “fear of missing out.”
The second metric, liquidity inventory ratio (months), also reinforces CoinNiel’s bullish outlook. This metric tracks and compares existing demand for Bitcoin to available supply on exchanges, showing whether demand can exceed available supply.
When this ratio increases sharply, it is generally a sign that demand is absorbing the newly created supply. According to the data shared by the analyst, the inventory liquidity ratio has also reached an extreme value of 3.8.
However, this extreme reading is only a reflection of what is happening on US stock markets. Consequently, CoinNiel suggested that for the first time in years, US exchanges are seeing exceptionally high demand relative to available coins.
In theory, a value of 3.8 implies an imminent supply shock in the scenario where current conditions prevail. But the analyst stressed that this won’t necessarily happen, as a figure of 3.8 is more of a sign of increased demand for whales than a surefire way to predict supply shocks.
The whole picture, especially when these two indicators are looked at together, looks distinctly optimistic. Indeed, available data indicates that whales are likely positioning themselves for what could be a resumption of Bitcoin’s 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 past 24 hours.
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Featured image by DALL.E, chart by TradingView
