IntoTheBlock provides an explanation on the reasons behind Bitcoin’s behavior
IntoTheBlock, a blockchain analytics firm, has provided insights into the unexpected decline in Bitcoin’s market following the approval of the Bitcoin ETF. According to data shared in a post on January 19, Bitcoin prices have dropped by around 10% in the past week, contrary to market predictions. IntoTheBlock’s analysis reveals several key factors contributing to this trend.
One significant factor is the increase in Bitcoin inflows into centralized exchanges over the past six weeks, with nearly $2 billion in net deposits since December. This surge in exchange deposits usually indicates a selling trend, raising questions about who is selling and why.
Another factor highlighted by IntoTheBlock is the movement of older Bitcoin, which has recently reached a record high in average holding time before being transacted. This trend was particularly noticeable on Monday and suggests that long-term holders, potentially including those invested in the Grayscale Bitcoin Trust (GBTC), are starting to move their assets, possibly signaling a sell-off.
Further analysis reveals a shift in Bitcoin holdings across different wallet sizes. Wallets holding more than 1,000 BTC have increased their holdings in January, while those with fewer than 1,000 BTC have reduced their holdings. This change is primarily seen in wallets that have held Bitcoin for a period ranging from the previous month to the last 12 months.
Additionally, long-term Bitcoin holders have slightly decreased their overall holdings, deviating from the typical accumulation pattern seen in previous months. On the other hand, short-term traders have witnessed a noticeable increase in Bitcoin holdings since October 2023, a trend often associated with bull markets. However, this shift from long-term to short-term holders can sometimes indicate market tops.
Despite these trends, the overall outlook for Bitcoin’s market is not entirely bearish. The current situation is characterized by a lack of trading volume compared to previous bull markets. Furthermore, the minimal decrease in the balance of long-term holders and a relatively modest Market Value to Realized Value (MVRV) ratio of 1.88 suggest that Bitcoin may be experiencing a temporary setback rather than entering a significant bear market.
