While the bitcoin (BTC) price outlook remains bullish in the long term, there could be a correction, noted analyst Willy Woo in his latest market newsletter published this Tuesday, August 24. Hours after its publication, the price declined slightly.
Drawing from new on-chain data, Woo states in bitcoin market bulletin
#026 that long-term investors entered a selling phase of medium magnitude. “Our supply and demand model is in a bearish divergence, suggesting that the price now needs to correct to lower levels to find equilibrium,” Woo says.
The analyst notes that this Monday, Aug. 23, he noticed a “larger than normal” flow of BTC entering exchanges
to be sold, along with a movement of coins from long-term investors to speculators. “This massive flow of coins that were accumulating, into speculative markets represents a bearish view,” Woo asserts.
The specialist shows an updated version of the bitcoin
trading heat map in which a green circle on the price curve denotes buying, while a red circle is associated with selling. The size of the circle gives an idea of the volume of coins exchanged. Bitcoin trading heat map as of 8/24/2021. Source: charts.woobull.com.
In this version of the buying and selling map, the analyst clarifies, the flows from long-term investors to speculators and the outgoing and incoming BTC flows to and from exchanges are recorded simultaneously. In both cases red is a bearish sign and green is bullish, Woo reiterates.
Supply shock is in bearish divergence
Another version of the above heatmap is presented by Woo in the chart below, in which the shock or unavailability of BTC supply is decreasing, both with respect to liquid supply and supply on exchanges. This implies that supply is increasing. “It is clear that the supply side
The market has expanded, while the price has not yet acknowledged it with a downward correction. It’s a bearish setup, what we like to call a bearish divergence.”
There is more BTC availability on exchanges and more bitcoin liquidity, says Woo. Source: charts.woobull.com.
This is the opposite situation to the one presented by Woo on several occasions, when supply unavailability was growing, and that fact was not recognized by the market with upward price action.
, discussed by CryptoNews, Woo referred to the fact that long-term investors continued to accumulate bitcoin quietly, unnoticed by the market. “I haven’t seen an opportunity like this since Q4 2020, when the network experienced a similar supply shock divergence, unrecognized by the market.”
Bitcoin flows to exchanges
Net bitcoin flows are now on the bearish side, thanks to consistent moves to exchanges, to be sold, Woo asserts. The chart below provides “a good visualization of the magnitude and progression of inbound flows,” he says.
After a spike in outbound BTC flows from exchanges, inbound flows intensify. Source: charts.woobull.com.
Sales are increasing this week, according to the chart, but would not have peaked yet, Woo assures. “Net flows are positive, implying that coins are coming to exchanges to be sold.”
Bitcoin is no longer at “realization price
last week’s market analysis, Woo presented
a bitcoin valuation model, based on three scenarios of unavailability or supply shock. In that model, a price of USD 55,000 was anticipated for bitcoin, implying a 20% undervaluation of the BTC price.
Bitcoin valuation based on three supply shock scenarios. Source: charts.wobull.com.
This time around, with the new wave of supply entering the market, the gap has closed, Woo claims, the price is located in the middle of the valuation range, as the chart above shows. “In essence, the price of BTC is in balance with the new supply and demand dynamics of long-term investors. It is no longer undervalued.”
Even though the net flow of BTC changed direction and is now entering the exchanges, it would keep the downward pressure on. Woo says it could be a “consolidation of a bearish sideways move” if new buyers enter the market.
However, with the data so far, the expectation is for a price pullback “of unknown magnitude, until new data comes into play,” Woo says. In the price discovery mechanism, the band between USD 40,000 and USD 45,000 is an area of strong technical support, according to the analyst. At the time of writing, BTC is trading at USD 48,259, according to the CryptoNews price calculator.