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Brief BTC Update Last Week of February

Many of you were probably caught off-guard when BTC plummeted down to $45000, losing more than $13000 in value. But what if I told you that there was a sign leading to this dump? Unfortunately, I spotted it post-factum, when I was running exchange flow analysis.

Exchange flow balance

The exchange Flow balance shows the difference in the amount of BTC tokens moving to and out of exchange wallets. If the value is positive, more BTC entered the exchange than have left. If the value is negative, more BTC flowed out of exchanges than flowed in.

While going through graphs, I have noticed something interesting – there was a massive exchange inflow – almost 33k of BTC was moved into exchanges when the price reached $58000 – right before this massive dump. While looking through transactions, I was able to spot at least one wallet that moved over 2000 BTC from a personal wallet to an exchange wallet, foreshadowing a significant BTC sale, which contributed to a Monday price drop. Exchange inflow is an excellent indicator, which I have been overlooking in the past but will include more often in my analysis.

Despite this dump, there is some positive news:

Holder Distribution

According to the data, the number of wallets that have between 1 and 100 BTC has noticeably decreased. At the same time, the number of wallets that have less than 1 BTC and wallets that have more than 100 BTC increased. This tells us that both whales and retail investors remain quite bullish on BTC.

So what can we expect from the BTC?

At the moment we are still going accordingly to a local bearish scenario. While there are no market-reversal signals that indicate a bullish cycle end, we need to proceed with caution as we might see more corrections in the following days. At the moment, our most important support lines lay between $44000-48000 levels. It’s important to watch them, as the ability to stay over them on 24h and 1W candles will give enough fuel for the continuation of the bull run. Failure to stay above that line will likely bring us to these important support levels:

  • $44000. If the daily candle will close below it, our next stop is at $40000. I really doubt that we will move below that point
  • $40000 movement below this line is dangerous, as it will slow down the market and we might even see flash crashes down to $32000, which would be a great buy opportunity. I still anticipate Bitcoin to continue its growth, despite periodic corrections.

So, why am I still bullish on BTC despite these bearish signals?

  • Payments giant Square said Tuesday it had purchased an additional $170 million of bitcoin (BTC), adding to the stash it purchased in October.
  • Exchange inflow balance returned to its normal, which means that bears are getting weaker
  • Holders distribution indicates that whales continue to accumulate BTC

Summary: We are still in the bull cycle and might even see a recovery to 55-56k values, however, sales pressure is growing, hence I do not plan to purchase BTC at any value above $40,000 as we still can go through several 10-15% BTC corrections. I will not sell/buy any large assets like BTC or ETH unless they will experience a 20-25% price decrease.

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