The prospective president of the American League is letting go! Bitcoin falls instead of rising

Yesterday (2nd) evening, US Federal Reserve Chairman Jerome Powell said at the central bank forum that there has been some progress in the policy of controlling inflation and is moving towards the goal, but he still hopes to see more progress before he has enough confidence. Initiate interest rate cuts.

Ball's remarks were interpreted by the market as "dovish", and U.S. stocks also surged after hearing the news. According to "Barron's", the closing prices of the S&P Index and Nasdaq hit new highs last night. Tesla rose rapidly after vehicle delivery data exceeded expectations, and finally closed at $231.26, an increase of 10.2%.

While U.S. stocks outperformed, the cryptocurrency market languished. The market price shows that Bitcoin fell from $63,152 after Ball’s speech. As of this morning, the decline has not stopped, and it is currently quoted at $61,221.

Source: CoinMarketCap
Bitcoin daily price chart

Analysts are bearish: "3 indicators" show or peaking

Bitcoin has fallen 8.75% over the past month, leading market analysts to question whether prices have entered a cycle top and shared three on-chain data.

Indicator 1: The inflation rate of long-term Bitcoin holders is close to the critical value

Charles Edwards, founder and analyst at Capriole Investments, wrote that multiple on-chain indicators indicate that Bitcoin’s failure to hit new highs after two retests is a “sign of weakness.”

The first piece of data is the Bitcoin Long Term Holder (LTH) inflation rate, which has been rising steadily over the past two years.

According to the explanation of the blockchain data platform Glassnode, the long-term holder inflation rate means the annualized ratio of long-term holders accumulating or distributing Bitcoin relative to the daily miner issuance. This value helps investors identify Net accumulation period and net distribution period.

Edwards pointed out that when the peak of market inflation is higher than the threshold of nominal inflation 2.0, it usually means that Bitcoin may have reached the top of the cycle. The current value is at 1.9, which makes him pessimistic about the market outlook.

Image source: Glassnode
Long-term Bitcoin holders see inflation approaching critical value

Indicator 2: Bitcoin dormant traffic has increased for three consecutive months

Another indicator that helps determine market cycles and assess bullishness or bearishness is Dormancy Flow. This is an on-chain metric that measures the number of coins being spent relative to the overall trend

Data from Glassnode and other platforms show that Bitcoin’s dormant traffic Z Score has increased rapidly in the past 90 days.

Edwards noted that the metric peaked significantly in April, indicating a significant increase in the average age of tokens spending in 2024. When this value peaks, Bitcoin typically reaches a cycle top three months later.

At current values, dormant traffic Z Score data suggests that Bitcoin is overvalued relative to the sum of coins in trade without the support of trading volume. This means that Bitcoin prices may have reached a cycle top, which is also bearish for the entire crypto market.

Image source: Glassnode
Bitcoin dormant traffic rises for three consecutive months

Indicator 3: Bitcoin’s 7-10 years old currency expenditure volume surges

Judging from historical trends, when Bitcoin’s spending volume suddenly increases in 7-10 years, it may be a signal of the top of the cycle.

The increase in spending volume in 2024 also indicates rapid progress in this cycle. Edwards wrote on July 2 that a large number of Bitcoins were moving on the chain, which was 10 times more than the previous high.

Image source: Glassnode
Spending surges for Bitcoin 7-10 years old

Edwards also pointed out that more than $9 billion worth of Bitcoin has been transferred from addresses that have been held for more than ten years. He attributed the incident to collapsed exchange Mt. Gox, which was preparing to start paying creditors in July.

Bitcoin financial services company Swan also expressed a similar view, saying that the market is worried about the impact of Mt. Gox starting to pay back money, because the exchange holds about 140,000 Bitcoins.

But Swan also pointed out that many creditors are long-term holders of Bitcoin and also have amortization options. Institutional ownership and tax considerations suggest that even if all tokens enter the market at the same time, the selling pressure will be gradual rather than a one-time smash.

[Disclaimer] There are risks in the market, so investment needs to be cautious. Analysts' opinions are for reference only. Users should refer to more diverse indicators to judge whether to invest and consider whether any opinions, views or conclusions in this article are consistent with their specific circumstances. Invest accordingly and do so at your own risk.