Bitcoin (BTC) Faces Potential Downtrend Amid Rising Dormancy and Inflation Metrics

• Renowned financial analyst Charles Edwards warns of multiple bearish signals for Bitcoin (BTC).
• Recent data indicates a significant price drop in BTC over the last 24 hours, sparking concern among investors.
• Edwards’ insights into intra-chain metrics and long-term holder behavior highlight potential market turning points.

Discover critical insights into recent Bitcoin market dynamics with expert analysis from Charles Edwards.

Long-term Bitcoin Holders’ Inflation Rate Reaches a Critical Threshold

Charles Edwards, founder of Capriole Investments, points to various on-chain metrics indicating Bitcoin’s inability to surge to new highs after two attempts, labeling it a “weakness signal.”

In his recent newsletter, Edwards highlighted that the long-term holder (LTH) inflation rate for Bitcoin has steadily increased over the past two years. According to Glassnode, the LTH inflation rate measures the yearly accumulation or distribution rates above daily miner issuance. Elevated values suggest that as LTH’s Bitcoin holdings decrease, they contribute to increased selling pressure in the market.

Edwards further stated that at bull market peaks, market inflation often exceeds nominal inflation (threshold of 2.0), indicating a high probability of the market being at its cyclical top.

“At 1.9 currently, we are nearing this critical level.”

Rising Bitcoin Dormancy Flow Signals Market Shifts

Another critical metric for assessing market cycles is the Dormancy Flow, which measures the number of coins sold relative to the overall trend, providing insights into whether Bitcoin is in an uptrend or downtrend.

Additional data from Glassnode reveals a sharp increase in Bitcoin Dormancy Z-score over the past 90 days. Edwards noted that this metric peaked significantly in April, with the average age of sold coins now considerably older compared to 2024.

“Typically, price rallies peak about three months following such Z-score peaks. We are now three months past this peak, with price declines mirroring the structures observed in the 2017 and 2021 peaks.”

“The current Dormancy Flow Z-score indicates that Bitcoin is overvalued relative to transactions not supported by trading volume, suggesting a cyclical peak.”

On the Other Side of Bitcoin’s Market Dynamics

Spent Volume, a metric that calculates the total volume of digital assets sold and provides a comprehensive view of overall market activity, underscores another potential market peak. Analysts observe that a sudden increase in the 7-10 year Spent Volume could indicate an impending cyclical top for Bitcoin.

“The entire history of this chart has been erased due to massive amounts of Bitcoin movement on-chain.”

Market Tensions Fueled by Mt. Gox Repayments

Furthermore, Charles Edwards pointed out that over $9 billion worth of Bitcoin has been moved by addresses older than ten years, linking this activity to the defunct crypto exchange Mt. Gox’s preparations to repay creditors in July.

Swan, a Bitcoin financial services company, echoed this sentiment, expressing market concerns over the impact of the anticipated release of 142,000 Bitcoins (approximately $9 billion at current prices) by Mt. Gox creditors after a decade.

Swan added, “While many creditors are long-term investors with payment options, institutional ownership and tax considerations suggest gradual selling pressure rather than a sudden sell-off, even if all cryptocurrencies are returned at once.”

In a subsequent X post, the company explained that ongoing government sales contribute to a supply-side pressure on Bitcoin.

Conclusion

To summarize, various metrics and expert analyses suggest that Bitcoin may be at a critical juncture, with potential peaks and substantial market movements on the horizon. Investors should stay informed and consider these insights while making decisions, understanding the inherent risks involved.

This article does not contain investment advice or recommendations. Each investment and trading action involves risks, and readers should conduct their own research before making any decisions.