Data shows that a major correction in the price of Bitcoin is unlikely in the short term
Willy Woo, a Bitcoin analyst, sees three reasons why an explosion is unlikely to occur so early for the price of BTC
Despite Bitcoin’s ( BTC ) sharp rise in November, the price is consolidating above US$15,000 as a network analyst, Willy Woo says a top explosion is unlikely for three main reasons.
The three factors are the increasing exit of funds from exchanges, the increase in „HODLers“ and data showing that investors have already made a profit.
Bitcoin is switching from exchanges to individual portfolios
According to Glassnode data, a large amount of Bitcoin left the centralised exchanges at the end of October.
Woo says this metric is optimistic because it shows that investors are transferring funds from trading platforms to personal portfolios. This indicates that users are maintaining their BTC with a long-term investment strategy.
The analyst noted that the data shows the largest number of Bitcoins leaving exchanges in a single day in the last five years. He explained:
„An incredible amount of coins have been collected and transferred to individual portfolios. Zooming out, putting it into perspective, is the biggest one-day discovery on this 5-year chart. ”
The number of „HODLers“ is increasing
In the market for cryptomorphs, analysts refer to long-time Bitcoins holders as „HODLers“. They tend to keep BTC for extended periods, often for more than a year.
Before the start of Bitcoin’s strong rise, which resulted in new highs of several years, Woo said that the number of Bitcoin HODLers was increasing significantly. It recorded its highest peak since October 2017, which occurred just a few months before the BTC reached its highest peak in December. Woo noted:
„Before this pump, the influx of new HODLers seen in the blockchain was increasing. This absorption size was last seen in October 2017; that was one month before BTC went into its boom in 2017“.
The high number of HODLers is an important metric because it shows the genuine retail demand behind the upward trend. A BTC bullishness may become vulnerable to a major downturn if it is led primarily by the futures market.
Lower Risk of Deep Correction
The Bitcoin Spent Output Profit Ratio (SOPR) is an indicator that shows whether investors are making a profit.
Glassnode data shows that quite a number of traders made a profit last week. This shows that the threat of a large retraction in profit making is less because investors have already started to realize their profits as those currencies have been absorbed by market buyers.
Based on the three data points, Woo emphasized that he does not see a spike in the boom occurring. The term blow-off top refers to a technical formation in which the price of an asset falls sharply after reaching a heavy resistance level. Woo wrote :
„Overall conclusion: I am not expecting an explosion. Expecting the conclusion of a consolidation, then more optimistic action. ”
In the short term, the risk to Bitcoin’s recovery remains the overcrowded derivatives market. As such, analysts anticipate some consolidation, but not a deep correction, at least for the time being.