The price of Bitcoin has been trending downward since reaching a new all-time high of $123,731 on August 14. The leading cryptocurrency is now trading at $115,892, marking a 7% drop in less than a week.
This decline has raised concerns among traders, but on-chain data indicates a potential recovery, led by the largest Bitcoin investors, may be on the horizon.
BTC may enter a new bullish phase, says the analyst.
In a new report, the anonymous analyst at CryptoQuant, SunflowrQuant, noted that "a new bullish phase for Bitcoin may begin in the near term," as a key on-chain indicator shows positive signals.
SunflowrQuant assessed the whale ratio on Bitcoin exchanges and found that the indicator had risen to a region historically aligned with local price bottoms.
The whale ratio on Bitcoin exchanges measures the amount of coins flowing into exchanges from the top 10 transactions. An increase in the ratio indicates heightened activity from large investors, typically in preparation for major market moves.
The report clarified that "when this ratio rises, it indicates that large investors (whales) are becoming more active on exchanges — and this is often interpreted as a sign of preparation before major market moves."
The analyst also noted the historical performance of the whale ratio on Bitcoin exchanges and found that the currency enters a bottom phase whenever the indicator rises to test the 0.50 level.
The analyst said, "Looking at recent years, whenever the whale ratio on exchanges tested the 0.50 level, it often indicated local price bottoms, followed by periods of consolidation and then upward movement."
This metric is observed using a seven-day moving average, currently sitting at 0.48, approaching the 0.50 mark.
If the history holds, this pattern suggests that the recent decline in Bitcoin's price may be nearing its end, laying the groundwork for a new rally.
The Bitcoin liquidation map indicates a price magnet of $120,000.
The readings from the Bitcoin liquidation map support this bullish expectation. According to Coinglass data, there is a concentration of leveraged positions and liquidity above the coin price near the $120,000 area.
Liquidation maps are visual tools that track the positions of leveraged traders (long and short) in the market and highlight price levels where mass liquidations are likely to occur.
Typically, when capital pools form above the market value of the asset, they attract short-term bullish momentum as traders seek to exploit these liquidity areas.
Therefore, it may attract short-term bullish momentum for Bitcoin as traders seek to capitalize on it.
Risks of BTC dropping to $111,000 if selling continues.
If SunflowrQuant's predictions prove correct and Bitcoin finds a bottom soon, the currency could bounce back towards the $120,000 mark after a period of consolidation.
However, if selling pressure intensifies in the short term, Bitcoin risks extending its decline to $111,961, a level last seen on August 3.