Bitcoin’s price [BTC] hit a local high of $94.7k on Monday, 05 January. In an earlier report, AMBCrypto highlighted why analysts thought that a retracement towards $80.6k was likely.
The presence of liquidation levels above the $94.5k local resistance and a cluster of liquidations below the local support at $84k held the answer to this expectation. Such a price drop may be playing out, though it might be too early to be certain.
After reaching Monday’s high, Bitcoin fell by 2.40%, with the crypto trading at $92.5k at press time. Despite the risk of a short-term price drop, however, there is compelling evidence that sidelined liquidity could step in and help in BTC’s recovery.
Bitcoin’s buying power and the net capital flow clues
In a post on CryptoQuant Insights, analyst Darkfost observed that the current Bitcoin/stablecoin data “remains highly constructive.” Fresh stablecoin inflows to the exchange, combined with the falling BTC price during the correction in December, saw the ratio fall lower.
It showed that there was high buying power in the market. The signal it gave at the time of writing was “especially compelling”. The ratio has jumped higher since the start of January, which could mark the early stages of capital deployment.
Analyst Axel Adler observed that overall capital flows remained negative from 26 December to 03 January. This meant realized losses outweighed realized profits, with peak pressure on 26 December.
By the end of the week, the capital flows had become weakly positive. Realized profits slightly outweighed the losses. Glassnode data confirmed the bullish shift in recent days.
Finally, the 7-day moving average of the Bitcoin profit/loss ratio had been below 1 for the better part of December, but it pivoted back above 1 – Reaching 1.78.
The fall in Bitcoin supply in circulation, alongside strong ETF inflows, supported the idea that Bitcoin could make further gains in the coming weeks.
Final Thoughts
- Bitcoin is up 6% so far in January, with sidelined capital reflecting high buying power in the market.
- Short-term capital flows have not compensated for the heavy losses made in December yet.