The Bitcoin market continues to reflect a lot of uncertainty, with the price showing little to no signs of recovering from the clear bearish trend established over the past two weeks. However, on-chain data has surfaced that puts into perspective the price trends of leading cryptocurrencies and what market participants can realistically expect as a result.
Binance and other major exchanges witness capitulation
In a recent QuickTake post on the CryptoQuant platform, analyst CryptoOnchain revealed the dramatic changes he has noticed across the top exchanges involved in Bitcoin trading. The relevant metric here is the Bitcoin taker-purchase ratio, which measures the ratio of trade volume initiated by buyers to the size of trades induced by sellers. In this case, the analyst measured Binance's taker-buy ratio and the aggregate taker-buy ratio of “all exchanges.”
Values above 0.5 represent relatively more buyers rather than fewer sellers. Conversely, if sellers dominate across the measured exchanges, the value will be below 0.5 points. As reported by CryptoOnchain, Bitcoin's taker-purchase ratio recently fell to a “multi-year low” of around 0.47. A taker-buy ratio below 0.5 is expected to confirm the overwhelming selling pressure reflected in the Bitcoin price, as clearly seen on Binance, the world's largest cryptocurrency exchange.
What is interesting about this spike in selling pressure is how it tracks the recent spike previously noted in currency inflows. The analyst explained that a typical capitulation sequence begins with a “panic influx” and ends with a scenario in which investors rush to move their Bitcoin holdings onto exchanges. After that, aggressive selling continues, increasing bearish pressure on prices.
Typically, when a market records sales this high, it means that market sentiment may be in a state of fear. This is true, as the analyst explained, “The advantage of aggressive sellers over buyers has reached its limit.”
Bitcoin market outlook
For now, as the market appears to be struggling with this wave of supply, the bearish pressure prevailing in the market is likely to push Bitcoin prices further down.
However, CryptoOnchain once again highlighted known historical trends that suggest this type of capitulation event, where the market wipes out weak hands, often precedes the establishment of a market bottom. History suggests that the Bitcoin market may be approaching a price level where we see a significant bullish reversal.
For this to be possible, the analyst added, it will most likely be conditional on a definitive recovery of the 0.5 level, especially if it occurs on a large exchange like Binance. At the time of writing, Bitcoin is worth around $106,900, with a small but insignificant growth of 0.3% over the past day.
Featured image from Flickr, chart from Tradingview
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