BITCOIN
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Charles Edwards, the founder of Capriole Investments, points out that several onchain indicators highlight a potential weakness in Bitcoin’s ability to reach new highs after two attempts. In his recent analysis, Edwards emphasized that the inflation rate among Bitcoin’s long-term holders (LTH) has been on the rise for the past two years.
According to data from Glassnode, this LTH market inflation rate calculates the yearly rate of accumulation or distribution among holders, adjusted for daily new coins mined. A higher rate implies an increase in selling pressure due to reductions in Bitcoin holdings among long-term investors.
During periods when the market inflation exceeds the general inflation rate at a 2% threshold, it usually signals a high probability that a market peak, or “cycle top,” has occurred. Edwards expressed concern as the rate has approached 1.9, dangerously close to this critical threshold.
Dormancy flow, another critical metric for evaluating Bitcoin’s market cycles and sentiment (bullish or bearish), has shown a significant uptick over the past three months. This metric measures the activity level of spent coins against a backdrop of general trends.
Glassnode’s data indicates that the dormancy flow z-score has risen sharply during this period, peaking notably in April. Edwards interprets this as an indication that older coins are moving, which historically correlates with market peaks approximately three months later. Given that it’s now been three months since the peak, the ongoing price decline and stable dormancy z-score pattern align closely with past market tops in 2017 and 2021, possibly pointing to current overvaluation.
Edwards also highlighted the importance of monitoring spent volume patterns, particularly sudden increases or clusters that could denote potential risk zones. Recent data shows a marked increase in the volume of Bitcoin moved that dates back seven to ten years, suggesting a fast-evolving cycle that could be nearing its peak.
An impactful observation by Edwards in a July 2 post on X noted an unprecedented movement of Bitcoin, with amounts surging to ten times those of previous highs, predominantly due to historical movements on the chain.
Further, over $9 billion in Bitcoin has been relocated by decade-old addresses, likely connected to preparations by the now-defunct crypto exchange Mt. Gox to commence creditor repayments. This move aligns with predictions by Swan, a Bitcoin-centric financial firm, which also voiced concerns about the potential market impact of approximately 142,000 Bitcoin becoming liquid once again after a decade.
Swan anticipates that while many creditors are poised to hold onto their payouts, considerations such as institutional ownership and tax implications could moderate the selling pressure. Adding to this, a recent revelation from Arkham Intelligence highlighted significant transactions from a wallet tagged by the German Government (BKA), including sizeable transfers to major exchanges like Coinbase and Bitstamp on July 2.
These patterns and transactions, observed by both individual analysts and firms, suggest that Bitcoin could be at a significant turning point, influenced by historical sell patterns and the strategic decisions of long-term holders and institutional players.
