Bitcoin has the prospect of a massive downward correction as on-chain data shows a slump in over-the-counter trades.
According to the data fetched from CryptoQuant, the total number of Bitcoin tokens flowing from Coinbase Pro’s addresses to the newly created cold wallets has been since BTC / USD dropped over $ 23,000.
Coinbase Pro Bitcoin Outflow chart. Source: CryptoQuant
As Ki-Young Ju, CEO of CryptoQuant, mentioned, these wallets contain Bitcoin for large crypto-enabled companies like Genesis Trading (which buys Bitcoin for grayscale investments, one of the largest crypto accumulators) and Ruffer Investment (which is worth around US $ 750 million in BTC Dollars) last year).
This allows the data analytics portal to equate large BTC transfers from Coinbase Pro with new wallets as OTC transactions.
Retail participation high
The statements came when Bitcoin hit another all-time high on Thursday, hitting $ 29,321 before New Years Eve. The most recent rally came on the backdrop of a depreciation of the U.S. dollar and the prospect of new institutional investment in the cryptocurrency space, particularly after Skybridge Capital announced it was holding $ 182 million worth of Bitcoin.
The news also coincided with a rebound in stable coin inflows into all cryptocurrency exchanges from their December 13 low. A CryptoQuant metric earlier this week showed the total number of stablecoin counts rose from 20,000 (BTC price: $ 19,270) to 30,590 ($ 27,000).
Bitcoin rally pauses after hitting $29,000. Source: BTCUSD on TradingView.com
This indicated that the rally to $ 29,000 was mainly driven by retail, which further increased Bitcoin’s potential to make lower corrections in the upcoming sessions. Small and medium-sized capital traders tend to sell the cryptocurrency at its local peak, while investors with long-term prospects take advantage of these dips to buy it.
With falling OTC deals, it is possible that institutions are waiting for the next Bitcoin correction in order to accumulate more units.
“We haven’t had any noteworthy Coinbase outflows since $ 23,000, the tokens transferred are decreasing and the cash flow quota for all exchanges is increasing,” explained Ju. “It is still possible for institutional investors to join soon, but we could face a correction if this continues.”
The Bitcoin forecast for 2021
Many analysts agree that Bitcoin’s rally is so overheated that a price correction can be made. However, that hasn’t changed their view of a bullish year 2021 as long as the Federal Reserve holds on to its perpetual monetary stimulus plans to support the U.S. economy through the coronavirus pandemic.
David Grider, the leading digital strategist at Fundstrat, said in a note that he expects the price of Bitcoin to hit $ 40,000 within the next 12 months. He also pointed out that the cryptocurrency may face a lot of bumps on its way up, caused by potential regulatory action or mere profit-taking.
“We wouldn’t consider these events as long-term negatives for Bitcoin, but if such events unfold, they can have a negative impact on general market sentiment and prices,” explained Grider.