Analyst View: Analysis of the Main Reasons for Bitcoin's Weakness at the End of July and the Stalled Start of the Altcoin Season
August 5th - According to CryptoQuant analyst Arab Chain, the main reasons for Bitcoin's decline at the end of July are the combined effects of a decline in the liquidity inventory ratio, large fluctuations in ETF demand, and insufficient accumulation of smart addresses.
Specifically, the liquidity inventory ratio (blue line in the chart) has declined sharply, leaving only a historical low of 3 months of trading volume of Bitcoin available on exchanges. This liquidity crunch makes the market unusually vulnerable, and small sell-offs can trigger sharp fluctuations.
(Note: Liquidity Inventory Ratio = Exchange Available Volume / 30-day Average Trading Volume, below 6 months is considered a warning level)
Secondly, ETF fund flows (purple line in the chart) show highly volatile characteristics, exhibiting an unstable state of "large inflows and large outflows". When ETF funds are withdrawn, the market lacks other institutional funds to take over, resulting in insufficient price support.
Thirdly, the accumulation of Bitcoin by smart addresses (pink area in the chart) is too slow. Although some large holders continue to accumulate, the buying power is far from enough to offset market selling pressure and has failed to seize key moments for concentrated buying.
At the same time, Matrixport analyst Markus Thielen said that although the market continues to discuss the "altcoin bull market", there have only been two short-lived rebounds, and they are mainly concentrated on a few projects, with the overall market lacking sustainability.
The analysis also added that although the fourth quarter of 2024 was somewhat active, it failed to spread widely. The rapid decline in funding rates shows that bullish sentiment in the market has not yet effectively gathered, and fundamental support is insufficient. Future upward momentum remains to be observed.
In summary, the current Bitcoin market is under pressure due to insufficient liquidity, ETF demand fluctuations, and insufficient accumulation, while the rebound in the altcoin market may be difficult to sustain. Bullish sentiment in the market has not yet effectively gathered, and fundamental support is insufficient. Future upward momentum remains to be observed.
Overall, although there is anticipation for an altcoin bull market, the overall market performance still needs more positive signals to confirm the upward trend.
