One analyst suggested that two on-chain signals could be used to predict Bitcoin’s decline as they appear to have historically preceded declines in the cryptocurrency’s price.
Bitcoin sales for 7-year to 10-year old coins have skyrocketed recently
As pointed out by an analyst at CryptoQuant MailHowever, the BTC dump of 7-10 year old coins and the rise of ETH dominance can be two signs to look for before a coin depreciation.
The first indication of relevance here is the ‘Exhausted Life Ranges’, which check the movement of coins on a string and tell us which age ranges are responsible.
Various “coin age groups” in the market include coins based on the total amount of time they were sitting idle before being transferred or sold.
The group in question here is the “7-10 year old” group. Therefore, the Spent Output graph for this group shows the number of coins moved that were previously idle for periods in this range. Here is the graph for it:
The value of the metric seems to have spiked up in recent days | Source: CryptoQuant
As you can see in the chart, Quantum has identified the relevant trend points for this Bitcoin indicator as well as the corresponding BTC price.
The analyst explains that whenever the spending of the 7- to 10-year age range exceeds 5000, BTC usually notices a downward trend in its value.
Of the 7 times the signal was seen over the past few years, only once did the price drop.
Ethereum dominance has also skyrocketed in recent weeks
Another indicator that the analyst thinks is noteworthy is “ETH dominance,” which is a measure of the total share of the cryptocurrency market capitalization in Ethereum.
The chart below shows the trend in this metric over the past few years.
Looks like the value of the metric has been high recently | Source: CryptoQuant
It appears that Ethereum’s dominance over the 20% mark has also been a bearish sign for Bitcoin during this period.
In conclusion, the analyst suggests that proper use of these two indicators in conjunction may help investors prepare for downward trends in the future.
At the time of writing, the price of Bitcoin is hovering around $18.7K, down 16% in the past seven days. Over the past month, the cryptocurrency has lost 18% of its value.
The chart below shows the currency price trend over the past five days.
BTC's value has plunged down over the last day | Source: BTCUSD on TradingView
Featured image from Bastian Riccardi on Unsplash.com, charts from TradingView.com, CryptoQuant.com