- Recent on-chain bitcoin metrics have indicated a potential market top with a cycle peak similar to previous years.
- Analysts noted increased sales activity in line with historical trends.
bitcoin [BTC] it was down at press time, reversing its earlier rally above $63,000.
Over the past week, the cryptocurrency is now down 1.1%, with a more significant drop of 2.7% in the last 24 hours alone, bringing its trading price down to $60,929.
In the midst of these market movements is Charles Edwards, founder of Capriole Investments stated that various on-chain metrics indicate a potential weakening of Bitcoin’s market power.
Bitcoin’s Turning Point?
Charles Edwards has pointed to various indicators of the chain as having the potential to deplete the market. Oa significant feature is the behavior of Bitcoin long-term holder (LTH) inflation, which Glassnode tracks.
Source: Capriole Investments
The LTH inflation rate, which measures the annualized rate at which long-term holders sell their bitcoins compared to newly mined coins, has seen a steady increase over the past two years.
It is currently hovering near a critical mark historically associated with market tops. Edwards noted that an inflation rate in the LTH market approaching 2.0 nominal inflation often signals the top of the cycle.
At press time, the royal coin was perilously close at 1.9.
Another key metric Edwards discussed was Dormancy Flow, which assessed the value of spent coins relative to their age and overall transaction volume.
Recent data has shown a spike in Dormancy Z-scores, especially in April 2024, which could indicate that older coins are moving at a rate indicative of a cycle peak.
Source: Capriole Investments
Edwards elaborated,
“Peaks in this metric (z-score) typically see cycle peaks just three months later. Well, it’s now three months later. The price has only declined and the Dormancy Z-Score peak remains with a structure very comparable to the 2017 and 2021 peaks.
Dormancy Flow’s z-score at press time suggested that the price of Bitcoin could be at a peak for this cycle as it appeared to be overvalued based on the transaction volumes of older coins, which could indicate a broader market decline.
Additionally, spikes in the volume of Bitcoin spent, especially for coins that are 7-10 years old, often signal the peak of a cycle due to rising market risk.
Source: Capriole Investments
Edwards noted a significant increase in spent volume in 2024 and called the movement of an unprecedented amount of bitcoins on-chain extraordinary.
He also mentioned that over $9 billion worth of bitcoins had been mobilized from dormant accounts dating back more than a decade, primarily linked to the settlement activities of the defunct exchange Mt.
Cycle top in: Are traders informed?
While Charles Edwards highlighted the potential weaknesses in the price of Bitcoin, it is wise to explore other perspectives.
Analysis of short and long BTC liquidation leverage on Coinglass, data revealed that the majority of liquidations over the past 30 days were long positions, indicating that many traders expect bitcoin to rise in value.
Source: Coinglass
Only time will tell whether these long positions will prove profitable for traders, or if the price of Bitcoin will continue to fall, confirming Edwards’ perspective.
Read bitcoins [BTC] Price Prediction 2024-25
Meanwhile, as for where the price is headed, AMBCrypto’s recent news he hinted to a positive shift in mining activity.
Specifically, there has been a significant increase in miners’ reserves, which could potentially boost the price of Bitcoin.