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Bitcoin (BTC) is still in an accumulation phase despite the recent downtrend that has battered it below the $28,000 territory.
This is according to a recent analysis from a CryptoQuant-verified author, citing the asset’s cycle from 2021 to 2024.
The Accumulation Cycle Still Intact, Despite the Recent Correction
“Despite the falling spot price, bitcoin’s exchange stablecoin ratio is currently acting as a leading indicator to bitcoin, and other digital assets in correlation.”
— CryptoQuant.com (@cryptoquant_com) April 25, 2023
The analysis pointed out that bitcoin typically trades in two cycles: the accumulation and distribution cycles, with a pre-halving accumulation cycle occurring shortly before any halving event.
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Data suggests that the distribution cycle ended in late 2022. Bitcoin is currently trading within the pre-halving accumulation phase, which began this year’s onset and will immediately precede the 2024 halving. Notably, accumulation phases are usually characterized by an influx of institutional investors.
The report also considered the bitcoin exchange stablecoin ratio (ESR), which reflects the number of stablecoins held on exchanges compared to bitcoin. In the past, the ESR indicator and bitcoin’s spot price strongly correlated, meaning that the ESR could accurately predict bitcoin’s movements. However, last year, the selling pressure broke this correlation.
Now, the ESR is again reaching new highs, acting as a magnet to BTC’s spot price in the current market structure. This suggests that the ESR is again moving in tandem with bitcoin’s price, and a growing increase in the metric could very well indicate a potential rise in the value of BTC.
While a high ESR may suggest that traders are becoming more risk-averse and are moving their funds into stablecoins as a hedge against a potential downtrend, it could also mean that buying pressure is building up for BTC especially when investors are holding more stablecoins in exchanges. This could lead to an accumulation spree.
BTC realized price suggests an increase in profit
Moreover, the BTC realized price and average combined unrealized profit and loss indicators reveal that investors are currently in profit on their BTC investments. According to a separate analysis, a decline in losses usually precedes a bitcoin price surge.
This pattern was observed in 2015 and 2019, leading to rapid surges in BTC’s value. Notably, losses have been on a decline in recent times, signaling a looming price increase. Bitcoin is trading for $27,340 at the time of reporting, down 7.19% in the past 24 hours. Despite the recent slump, the asset is still 65% up this year.
Read more: Bitcoin rally expected to surpass $50k by 2024 due to halving event