Bitcoin has recently shown resilience, recovering above the $86,000 threshold after enduring a period of intense bearish activity. Despite this upward swing, underlying on-chain data suggests a market in a delicate balance, as a substantial volume of Bitcoin has moved to centralized exchanges, indicating a prevalent profit-taking sentiment among investors.
Billions in Bitcoin Flow to Exchanges
A Closer Look at Exchange Inflow
Crypto analyst Ali Martinez recently revealed that roughly 20,000 BTC, equivalent to nearly $2 billion, was transferred to centralized exchanges over the past week. This significant movement is tracked by the "Exchange Inflow" metric, a key indicator that monitors the volume of an asset flowing into exchanges. Such an increase often signals that investors intend to sell, thereby adding to the market's supply. Historically, a rise in supply without a corresponding surge in demand tends to depress the asset's price. Data highlighted by CryptoQuant's head of research, Julio Moreno, showed Bitcoin exchange inflows hitting approximately 81,000 BTC on Friday, November 21 — the highest since mid-July. This influx directly correlated with Bitcoin's price experiencing volatility, briefly dipping below $80,000 before its current recovery to about $86,070.
Is Bitcoin Entering a Bearish Profit-Taking Cycle?
CryptoQuant CEO's Perspective and Macroeconomic Watch
Ki Young Ju, CEO of CryptoQuant, asserts that Bitcoin is currently in a profit-taking phase, an assessment backed by the rising exchange inflows. His analysis utilizes the PnL Index Signal, which evaluates profit and loss levels across all wallets. Based on the current PnL Index readings, Ju suggests that classic cycle theory points towards Bitcoin potentially entering a bear market. He notes that only a surge in macro liquidity, similar to the economic conditions of 2020, could offset this profit-taking cycle. As such, the cryptocurrency market is now keenly focused on the upcoming Federal Open Market Committee (FOMC) meeting in December, with anticipation building around potential interest rate adjustments by the US Federal Reserve, which could significantly influence macro liquidity.
