Bitcoin may have a tough time charting a V-shaped recovery to recent highs in the short term, with on-chain activity showing increased selling pressure in the market.
In other words, the average size of inward-bound transactions to trading platforms has risen to eight-month highs.
"The data shows whales [large traders] are transferring their coins to exchanges," CryptoQuant CEO Ki-Young Ju told CoinDesk. "The cryptocurrency usually trades in a sideways-to-negative manner when whales become active on exchanges."
Bitcoin is trading near $16,820 at press time, representing a 2% drop on a 24-hour basis. The cryptocurrency saw rejection above $17,400 early on Friday.
The possibility of prices falling to or below Thursday's low of $16,327 cannot be ruled out with average inflows now moving above two bitcoin – into CryptoQuant's "danger zone."
A reading above 2.00 on the indicator has consistently paved the way for notable price drops this year. The indicator rose above that level at least a week before the 40% drop seen on March 12.
Similarly, the sharp sell-off seen in November 2018 was preceded by a sharp rise in the metric.
Technical chart studies indicate low odds of an immediate bounce to levels above $19,000.
Thursday's price drop was backed by the highest sell volume (red bar) since June 1. As such, the pullback looks to have legs. Short-term momentum indicators such as the five- and 10-day moving averages are now looking south.
Support is seen at $15,798 – the 38.2% Fibonacci retracement of the rally from September low to November high.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is an award-winning media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. In November 2023, CoinDesk was acquired by Bullish, a cryptocurrency exchange, which in turn is owned by Block.one, a firm with interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets including bitcoin and EOS. CoinDesk operates as an independent subsidiary, and an editorial committee, chaired by a former editor-in-chief of The Wall Street Journal, is being formed to support journalistic integrity.