Bitcoin price action has been muted in recent days, trading within the $90,000 and $88,000 levels. Classically, consolidation periods often precede major moves to the positive or negative side of the market.
As such, questions are being asked about the next trajectory of the flagship cryptocurrency. A latest on-chain assessment has offered a positive forecast on the next direction for the Bitcoin price.
Accumulation demand is rising to a record high
In a Quicktake post on CryptoQuant, on-chain analyst CoinNiel assumed that the Bitcoin price could be at the beginning of a bullish trend. Market Quantity based this forecast on two measures: the Accumulator Address Demand and the Liquidity Inventory Ratio (month).
Related reading
The Accumulator Address Demand metric monitors the net buying pressure coming from addresses that buy Bitcoin consistently, and without any significant selling. This behavior (of buying and rarely selling) is typical of the large-scale Bitcoin holders, better known as the whales.
Notably, CoinNiel has also pointed out that when large withdrawals from exchanges occur, they are rarely instigated by retailers, but by whales. Therefore, as the Bitcoin whales withdraw their holdings from the exchanges, their buying pressure translates into an increase in demand for accumulator addresses.
The chart above shows that the indicator has reached an all-time high. According to the crypto expert, this could be a sign that the whales are currently experiencing the “fear of missing out” at intense levels.
The second metric, the Liquidity Inventory Ratio (month), also reinforces CoinNiel’s bullish outlook. This metric tracks and compares existing Bitcoin demand to the supply available on exchanges, showing whether demand can overwhelm available supply.
When this ratio rises sharply, it is usually a sign that demand is absorbing the newly created supply. The data shared by the analyst shows that the Liquidity Inventory Ratio has also reached an extreme value of 3.8.
However, this extreme reading is only a reflection of what is happening on the US stock markets. Therefore, CoinNiel suggested that for the first time in years, US exchanges are registering exceptionally high demand relative to the available coins.
In theory, a reading of 3.8 implies the threat of a supply shock in the scenario where current conditions prevail. But the analyst emphasized that this does not necessarily have to happen, as a reading of 3.8 is a sign of increased demand for whales rather than a surefire way to predict supply shocks.
The big picture, especially when these two metrics are considered together, seems distinctly bullish. This is because available data indicates that the whales are likely positioning themselves for what could be a resumed bullish trajectory for the Bitcoin price.
Bitcoin price at a glance
At the time of writing, Bitcoin is valued at $88,520, reflecting a decline of more than 1% in the past 24 hours.
Related reading
Featured image by DALL.E, chart from TradingView