A larger number of long-term BTC holders are rapidly moving their coins to exchanges. Willy Woo believes that this trend is unlikely to reverse anytime soon.
In the last week, exchanges have received large amounts of BTC and that trend continues, analyst Willy Woo said recently. The analyst explained that the market was recovering after falling in mid-April. However, Elon Musk’s remarks on May 12th caused fear in the market.
“Markets started to drop immediately, due to large volumes of sales seemingly coming from whales,” said Willy Woo.
Although profit-taking is completed, there is a chance that there will be a bounce, according to Woo. Long-term investors would need to make purchases at an unprecedented level. This would allow the medium-term scenario to turn bullish, according to the analyst.
A Big Tide of BTC Is Entering Exchanges
“We have seen a huge tide of BTC entering exchanges. These inflows were initially bullish, before the second wave that emerged after Musk’s tweets,” Woo noted.
During the correction, the balance of dolphins and sharks remains little changed while the supply to whales decreases. Therefore, the decline in the price of the cryptocurrency corresponds to sales coming from “strong hands,” Woo suggested.
Woo uses a metric to detect the inactivity of BTCs, monitoring the average age of the coins sold each day. The analyst clarifies that the “age” of the BTCs is the time that they have remained latent until their sale.
On a recent chart, the analyst highlighted that the BTCs sold “are very young.” He believes that wealthy individuals or speculative institutional holders, who have recently entered Bitcoin, made big gains in the bullish market. They would now be yielding profits thanks to the FUD (fear, uncertainty, and doubt) that Musk caused, said Woo.
Profit-Taking Is Drawing to a Close Due to Lower SOPR
The SOPR indicator measures the magnitude of the gains from the sale of the BTCs. On another graph, Woo showed that this metric is about to cross the value 1, which marks the threshold of profitability.
Investors are moving BTCs that are making almost no profit, according to Woo. The market would have to sell at a loss if the SOPR continues to decline. Given the large amount of BTC sold, this is a possibility. This scenario is highly unlikely when the bullish market is in full swing,” Woo said.
“Strong Hands” Are Now Becoming “Weak Hands”
For much of 2020 and in early 2021, there was a steady flow of BTC from exchanges to cold wallets. During the current correction, this trend went from reflecting an increase in accumulation by large holders to reflecting a decline.
BTC outflows from exchanges dominated in 2020 and declined in early May of this year. On the contrary, the flows of BTC that are entering exchanges are growing rapidly. “Coins are moving into weak hands, that is, holders that were previously strong are becoming weak hands,” said Woo.
The aforementioned metrics indicate an opportunity for Bitcoin to rebound. However, it is not a clear “V”-turn but rather a relief rally. According to the NVT quotient, the long-range outlook for Bitcoin’s market cap remains healthy.
By Alexander Salazar
