Bitcoin is poised for a significant price movement, according to analysts studying onchain data. After a period of unusually low volatility, it seems that Bitcoin’s price is about to make a big move.
In a recent newsletter, lead Glassnode analyst James Check highlighted that the Sell-Side Risk Ratio for Short-term Holders is decreasing rapidly, indicating a lack of new price action in the market. This behavior suggests that Bitcoin is ready to break out of its current consolidation phase.
Check explained that when there is a contraction in price range, it is usually followed by an expansion in price trend. This situation is likened to a coiled spring, which cannot stay still for long before releasing its energy.
The Sell-Side Risk Ratio compares the profits and losses realized by traders to Bitcoin’s “realized cap,” which represents the total value of all bitcoins based on their last transaction. A low ratio implies that traders have already taken their profits or losses at current prices, signaling the need for a price movement to incentivize trading activity.
According to Check, this indicator suggests that the market is approaching equilibrium, indicating that a significant price move is on the horizon. However, the indicator does not predict whether the movement will be to the upside or downside.
In Glassnode’s weekly report, the firm highlighted that many short-term holder coins have been accumulated near the current price level, increasing the risk of volatility in either direction.
Despite the recent uptick in Bitcoin’s price, Check advised investors to monitor macro events that could lead to downside volatility. In particular, he mentioned the possibility of the Federal Reserve adopting a “higher for longer” interest rate policy due to persistent inflation expectations in the US. This could lead to a further drop in bond prices, affecting investor risk appetite across various asset classes.
Check emphasized that the bond market plays a crucial role in determining the stability of risk assets. If bond yields rise significantly, it could signal trouble for financial markets and lead to a swift change in investor sentiment.
In conclusion, while Bitcoin’s price has shown some positive movement recently, investors should remain cautious and keep an eye on external factors that could impact the market in the near future.
