A withdrawal in the price of Bitcoin (BTC) is likely based on several data points on the chain, namely the indicator of used output profit (SOPR), stablecoin inflow, stacked sales orders of $ 19,000 and Crypto and Fear Index. The question, however, is when this correction would take place.
Profit withdrawal possible with lower purchase pressure
The SOPR indicator essentially measures how profitable Bitcoin holders are at the moment. When SOPR is high, BTC risks a pullback as traders tend to sell when they are making a profit.
Meanwhile, stablecoin inflows show how many stablecoins, such as USDT Tether, are floating to exchanges. When the stablecoin inflow increases, it typically means that buyer demand increases. On the other hand, the selling pressure tends to increase when BTC reserves exceed the inflow of stack coins.
Over the last few days, the SOPR indicator has reached a level that previously led the price of Bitcoin to correct as at the end of 201
On November 20, Rafael Schultz-Kraft, Chief Technical Officer of Glassnode, noted:
“Adjusted SOPR (hour, 7d MA) as high as it has not been since July 2019. Correction in-depth?”
This trend could become worrying if the momentum in Bitcoin declines. Renato Shirakashi, the creator of the SOPR indicator, said Nobel Prize winner Daniel Kahneman’s work shows that investors are comfortable selling when they are in profit.
Therefore, if Bitcoin becomes stagnant or consolidates in the short term below the $ 19,000 resistance, a minor withdrawal may occur. Shirakashi wrote:
“People are generally much more comfortable selling when they make a profit. In a bull market, when SOPR falls below 1, people would sell at a loss and thus be reluctant to do so. This pushes supply significantly down, which in turn puts upward pressure on the rising price. ”
The rise in the Exchange Stablecoins Ratio from CryptoQuant coincides with the rising SOPR. The Stablecoins ratio is Bitcoin foreign exchange reserves divided by stablecoin reserves. As it rises, it shows that the potential sales pressure is rising.
As such, CryptoQuant CEO, Ki Young Ju, expects a short-term, though not a major correction, in the short term. He noted:
“BTC’s potential sales pressure is going up, but still low. We’ll see some corrections in a few days, but it will not be big. Long term bullish. ”
$ 19,000 stands in the way of a new record high
Exchange order books also show that the $ 19,000 level has become a major area of resistance. There are significant sales orders across Bitfinex, Bitstamp, Binance and Coinbase near $ 19,000, which could prevent a rally from continuing.
Ok 19000 is a bit stacked @CryptoCobain will have to pull the big money out. pic.twitter.com/KnNSzYYRnL
– Byzantine General (@ByzGeneral) November 21, 2020
Another possible factor that could trigger a short-term withdrawal is the Crypto Fear and Greed index. The index is still at dangerously high levels, which increases the likelihood of a correction.
The correction may come later
Over the past few months, however, stock market Bitcoin reserves have been in a continuous downward trend, as Cointelegraph reported. This could offset a major correction in the market, especially if the BTC bull run accelerates, triggering FOMO, which means a large influx of new buyers.
Year to date, Glassnode found that the balance of Bitcoin on exchanges fell by 18%. The continuous decline in foreign exchange reserves reduces the likelihood of deep withdrawals, which analysts like Ki have consistently emphasized in November.
In addition, there are other factors that can delay the correction until Bitcoin breaks $ 19,000 or potentially even $ 20,000.
CoinMetrics network data analyst Lucas Nuzzi found that the MVRV ratio tracking Bitcoin’s realized ceiling is not close to the level that marked previous peaks.
The term realized cap refers to the Bitcoin market value at the time investors invested BTC. If the realized ceiling is high, it means that many investors bought BTC at a higher price.
Therefore, there is a strong argument for a delayed withdrawal, potentially after the ongoing rally is being extended. On November 20, Cole Garner, an analyst at the chain, wrote:
“Bitcoin exchange liquidity is melting down. Institutions are not prepared for scarcity like this. ”