Bitcoin price movement has been subdued in recent days, trading within a range of $90,000 to $88,000. Classically, a period of consolidation often occurs before the market makes a significant move upward or downward.
As a result, questions are being asked about the next trajectory of the flagship cryptocurrency. The latest on-chain assessment shows a positive prediction about the next direction for Bitcoin price.
Cumulative demand index surges to record high
In a Quicktake post on CryptoQuant, on-chain analyst CoinNiel hypothesized that Bitcoin price may be at the beginning of a bullish trend. Market quants base this forecast on two metrics: accumulator address demand and liquidity inventory ratio (monthly).
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The accumulator address demand metric monitors the net buying pressure from addresses that continually buy Bitcoin and do not sell significantly. This behavior (buying and selling very little) is typical of large Bitcoin holders, commonly known as whales.
Notably, Coyneal also pointed out that when large withdrawals from exchanges occur, they are rarely caused by retailers, but by whales. So, when Bitcoin whales withdraw their holdings from exchanges, their buying pressure leads to increased demand for accumulator addresses.
From the chart above, the indicator has reached an all-time high level. Cryptocurrency experts say this could be a sign that the whales are currently experiencing high levels of “fear of missing out.”
A second metric, Liquidity Inventory Ratio (monthly), also supports Coinneal’s bullish outlook. This indicator tracks existing Bitcoin demand and compares it to the available supply on exchanges, indicating whether demand is likely to overwhelm the available supply.
When this ratio rises rapidly, it usually indicates that demand is absorbing newly created supply. According to data shared by analysts, the liquidity inventory ratio has also reached an extreme value of 3.8.
However, this extreme view only reflects what is happening on US exchanges. Therefore, CoinNiel suggested that for the first time in recent years, US exchanges are recording very high demand relative to available coins.
In theory, a reading of 3.8 means that a supply shock is imminent in a scenario where current conditions prevail. However, analysts stressed that this would not necessarily happen, as the 3.8 reading is more a sign of intensifying whale demand than a reliable means of predicting supply shocks.
The overall picture looks clearly bullish, especially when looking at these two metrics together. This is because the available data points out that the whale is likely positioned in what could be another bullish trajectory for Bitcoin price.
Bitcoin price overview
As of this writing, Bitcoin’s value is $88,520, reflecting a decline of more than 1% in the past 24 hours.
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Featured image by DALL.E, chart from TradingView
