Bitcoin: In Need of a Creative Rewrite
Since the Bitcoin ETF narrative triggered a 15% price drop last week, the price of Bitcoin has remained stagnant around $42,000. On January 11, the approval of the Bitcoin spot ETF caused the price to reach a local high of $48,900. However, speculative traders quickly sold off their Bitcoin, causing the price to drop to $42,000. Now, the question is whether the price of Bitcoin can avoid dipping below $40,000. On-chain data analysis provides insights into this matter.
Despite the price decline, large institutional investors have continued to buy Bitcoin behind the scenes. Speculative traders took advantage of the price increase that followed the ETF approval to sell at the top and make significant profits. As a result, the price of Bitcoin has remained relatively flat since then. Interestingly, on-chain metrics show that large institutional investors have remained resilient during this price downturn.
The Large Holder Netflow chart from IntoTheBlock tracks the trading activity of corporate investors by measuring the total inflows and outflows from wallets holding at least 0.1% of the current circulating supply of a cryptocurrency. Since the decline in BTC price began on January 11, the Large Holder Netflow has consistently shown positive values. This indicates that whales, or large institutional investors, have been accumulating Bitcoin. Between January 11 and January 17, these whales acquired a total of 15,950 BTC.
The chart clearly demonstrates that while the price of BTC has been declining, the whales have continued to accumulate. The 15,950 BTC that they acquired in the past seven days is worth approximately $681 million. With the growing adoption of Bitcoin ETFs, it is likely that participants and fund sponsors will continue this trend of whale buying in the coming days. If this happens as expected, Bitcoin will attract enough demand to stay above $40,000 in the short term.
Retail investors, on the other hand, are gradually becoming bullish on BTC again. After the panic sell-off that followed the ETF approval, retail investors shifted their focus from BTC to ETH and other altcoins. However, recent on-chain data shows that day traders are slowly becoming bullish on BTC once again.
According to IntoTheBlock’s aggregate exchange order books chart, there are currently active purchase orders for 44,709 BTC listed across 20 crypto exchanges, including Binance and Coinbase. At the same time, the total active sell orders stand at 40,968 BTC. This indicates that market demand for Bitcoin exceeds the active sell orders by 3,781 BTC. When demand outpaces supply by such a large margin, it signals that momentum is shifting in favor of the bulls. This suggests that as the panic sell-off subsides, retail investors are gradually taking bullish positions again.
In summary, the resilient buying pressure from whales and the excess market demand for Bitcoin are two important short-term indicators that point to the price of BTC staying above $40,000 in the days to come.
Looking ahead, if BTC can break above the $44,000 resistance level, it could catalyze more gains. Drawing conclusions from the whales’ buying trends and active Bitcoin trading orders, it seems likely that BTC will consolidate above $40,000 in the short term. However, in order for the bulls to gain control of the market, they must first overcome the $44,000 resistance level. If they can do so, it could potentially lead to a retest of $50,000.
Alternatively, if the market turns bearish, the bulls can rely on the significant buy wall at $40,180 for initial support. The chart shows that 731,800 addresses acquired 336,060 BTC at the maximum price of $40,178. If these holders rush to cover their positions, it could result in an instant rebound in the price of Bitcoin.
