Bitcoin on-chain activity is showing signs reminiscent of the period before its surge to all-time highs in 2021, according to recent data. Ki Young Ju, the CEO of analytics platform CryptoQuant, highlighted in a post on Twitter that Bitcoin velocity has reached multiyear lows.
Bitcoin has been maintaining a relatively static position at current price levels for a few months, resulting in a lack of clear price trends. This situation is reinforced by the velocity metric, which measures the movement of Bitcoin units within the network. CryptoQuant’s data reveals that the velocity on daily timeframes is currently at levels last seen in October 2020.
Ki commented on the significance of this situation, pointing out that it can be viewed both positively and negatively. On the positive side, it indicates that whales are holding onto their Bitcoin. However, on the negative side, it suggests that there is a lack of transfer of Bitcoin to new investors.
This absence of significant trading activity among high-volume investors aligns with the narrative that the market is currently in a “wait and see” mode regarding Bitcoin. Earlier in the year, as Bitcoin started its winning streak in the first quarter, there was a visible influx of new money into the space, resulting in a 70% increase in the BTC/USD price.
The volume data associated with Bitcoin’s current position is significant for another reason. In late 2020, the rebound of this metric coincided with Bitcoin’s first ascent above $20,000 and its subsequent surge to new all-time highs a year later. However, unlike the previous cycle, Bitcoin is currently oversold at its price of $26,000, as indicated by its daily relative strength index (RSI).
The RSI, measured by Cointelegraph Markets Pro and TradingView, has been at its lowest in five years this month and has yet to recover. This indicates a lack of investor interest and suggests that a potential recovery has not materialized.
In conclusion, the low Bitcoin velocity and oversold RSI signal reflect the current state of the market. While on-chain activity is reminiscent of the period before Bitcoin’s all-time high in 2021, the lack of transfer to new investors and the oversold RSI indicate a cautious market sentiment. It remains to be seen how these factors will impact the future trajectory of Bitcoin’s price.
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