It’s the most “organic” Bitcoin price hike in years. A trader explains why a blow-off top is unlikely

Bitcoin’s chain analyst, Willy Woo, sees three reasons why a blow-off top in Bitcoin’s price is unlikely.

Despite the significant rise in the price of Bitcoin (BTC) in November, the price of Bitcoin is consolidating above $15,000, and the chain’s analyst, Willy Woo, says a price rise is unlikely for three main reasons.

The three factors are the increasing outflow of funds from exchanges, the rise in “HODLers”, and data showing that investors have already made profits.

According to Coinmarketcap, Bitcoin’s market capitalization is currently $286,937,402,262.

Bitcoin is moving from exchanges to individual wallets

According to Glassnode data, a large amount of Bitcoin was leaving the centralised exchanges at the end of October.

Woo says this metric is optimistic because it shows that investors are transferring funds from trading platforms into their personal purses. This indicates that users are maintaining their BTC as a long-term investment strategy.

Net flows of Bitcoin in the exchanges Source: Glassnode

The analyst pointed out that Bitcoin is the crypt currency that has shown the most outflows from exchanges in a single day in the last five years. He explained that:

“A ridiculous amount of coins were taken to individual purses. Analysing from afar, putting this into perspective, the largest single day’s transfer can be seen in this 5 year graph”.

The number of “HODLers” is increasing

In the cryptomoney market, analysts have long referred to the News Spy forks as “HODLers”. That is, they tend to hold BTCs for long periods of time, often more than a year.

Before the sharp Bitcoin spike began, which led to new multi-year highs, Woo said that the number of Bitcoin HODLers was increasing significantly. It was the largest peak since October 2017, which was just months before the price of Bitcoin reached an all-time high in December. Woo noted that:

“Before this pumping, the influx of new HODLers seen in the blockchain was skyrocketing. I repeat, it was soaring, I’m not kidding. This amount of uptake was last seen in October 2017; that was a month before BTC entered its 2017 mania phase.”

The high number of HODLers is an important metric because it shows the genuine retail demand behind the uptrend. A rising Bitcoin price rally could be vulnerable to a major setback if it is led primarily by the futures market.

Less risk of a deep correction

The Bitcoin Spent Production Rate (SOPR) is an indicator that shows whether investors are taking advantage of their unrealised gains.

The Glassnode data shows that a fairly high number of investors benefited in the last week. This shows that the threat of a major setback in profit taking is less because investors have already started to realize their profits while these currencies have been absorbed by market buyers.

Bitcoin SOPR indicator. Source: Glassnode

Based on the three data points, Woo emphasized that he does not see a blow-off top coming. The term “blow-off top” refers to a technical formation in which the price of an asset decreases sharply after reaching a high level of resistance. Woo wrote:

“General conclusion: A blow-off top is not expected. Waiting for a consolidation to be completed, and then more upward action”.

In the short term, the risk to Bitcoin’s current bullish rally remains the crowded derivatives market. Hence, analysts expect some consolidation but not a deep correction, at least for now.