Leading on-chain analyst Will Wooexplained the reason for the sharp decline in Bitcoin price with the data he shared. According to Woo, the reason for the recent decline is the previously recorded 3AC-like “corporate sales”, but it is also possible to find some positive emotion in the developments.
As the analyst suggested, this sale was due to the negative net coin flow in the exchanges. This could mean that most of the market participants have entered the accumulation “mode” and are actively buying coins for storage in their cold wallets.
USD strength (DXY) was the giveaway to this last risk off move which took BTC and equities 3-4 days to reflect.
The sell-off by institutional traders was of the scale we saw in the 3AC unwind, however this time coins flowed off exchanges signifying accumulation is in play.
— Willy Woo (@woonomic) August 20, 2022
Sales by institutional traders were on the scale we saw in 3AC sales, but this time the coins came off the exchanges, showing that the accumulation trend is in play. – Willy Woo.
Earlier this summer, we did not see any inflows from centralized exchanges, as traders were mostly not actively buying any coins at their absolute lows, while providing additional liquidity to finance their open positions.
Regardless of the positivity around Bitcoin net flow on exchanges, the drop towards $21,000 can be interpreted as a response to the problems in the cryptocurrency market caused by the negative macro environment for at-risk assets like Bitcoin or Ethereum.
Unfortunately, it is not yet clear whether the bear rally will continue as there are no signals to indicate that BTC has bottomed.
DXY Rally As Bitcoin Drops
representing the strength of the American dollar DXY dataIt is also known as one of the sources that have a direct impact on cryptocurrencies.
By jumping above the 50-day moving average, DXY has reached new highs after a local correction that started a rally in equities and crypto markets. Considering the inverse correlation between assets, it becomes clear that with the current rate increase cycles, a major recovery in the cryptocurrency market is unlikely to occur.
As Willy Woo himself suggested, the crypto market could enter a prolonged consolidation as we saw in 2018.
You can follow the current price action here.
Disclaimer: What is written here is not investment advice. Cryptocurrency investments are high-risk investments. Every investment decision is under the individual’s own responsibility. Finally, Koinfinans and the author of this content cannot be held responsible for personal investment decisions.