Bitcoin Price Rally Could Fade Without Key Liquidity Indicator Rising

TLDR

• Bitcoin bulls managed to prevent a price drop into the $80,700 to $83,400 support zone.
• Futures market data points to a potential short-term liquidity grab near $93,500.
• Glassnode analysts emphasize the need for liquidity-sensitive indicators to confirm a sustained rally.
• Strong price recoveries in the past occurred once the realized profit/loss ratio stayed above 5.
• More than 22% of circulating Bitcoin is currently held at a loss, raising correction risks.

Bitcoin (BTC) bulls have managed to prevent a price drop into the $80,700 to $83,400 support zone. However, recent futures market data points to a potential short-term liquidity grab near $93,500. Despite this short-term bullish outlook, analysts from Glassnode emphasize that a more sustained recovery is contingent upon a key liquidity metric reaching a specific threshold.

Bitcoin Price Could Face Short-Term Gains

Bitcoin‘s recent price action shows strength, with bulls holding support between $80,700 and $83,400. Glassnode analysts highlight that this range has been a crucial point for Bitcoin’s price stability. The futures market data suggests a potential move toward $93,500, but analysts caution that these gains may be short-lived without a significant change in liquidity.

Market observers point to the realized profit/loss ratio (90-day moving average) as a critical indicator for confirming the sustainability of any rally. Glassnode noted that strong price recoveries over the past two years only occurred once this ratio stayed above 5. The firm emphasized that this ratio has historically signaled renewed liquidity inflows and capital rotation back into Bitcoin, which is essential for driving a long-term recovery.

Liquidity Metrics Must Improve for Sustainable Rally

Glassnode analysts further explained that for Bitcoin to make a more robust recovery, liquidity-sensitive indicators must improve. This includes watching the realized profit/loss ratio, as it is tied to Bitcoin’s market liquidity. “A transition toward a sustained rally must be reflected in liquidity-sensitive indicators,” the firm stated in an X post.

The increase in Bitcoin supply stress also raises concerns. Currently, more than 22% of the circulating Bitcoin supply is held at a loss, a situation last seen in Q1 2022 and Q2 2018. This condition amplifies the risk of a correction if Bitcoin fails to maintain key support levels, especially the short-term holder cost basis and the true market mean.

Limited Selling and Low Inflows Indicate Stabilization

Crypto data platform CryptoQuant shows limited selling activity at the moment, signaling a cautious market. Monthly BTC inflows to Binance are averaging about 5,700 BTC, well below the long-term average of 12,000 BTC. This decline in inflows indicates that investors are holding their BTC rather than preparing to sell.

Despite the low inflows, analysts argue that this is not necessarily a negative signal. “This historically low level of BTC inflows represents a rather positive signal,” noted crypto analyst Darkfost. The lack of major selling activity reduces the immediate downside risk but does not replace the need for liquidity confirmation to support a longer-term rally.

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