Is Bitcoin Gearing Up For A Bigger Rally? Here’s What On-Chain Data Reveals

Bitcoin has seen an uptick in price enough to recover from the losses in value from August. So far, the asset has surged by nearly 10% in the past two weeks alone, registering a 24-hour high of $66,000 earlier today, although BTC has now seen a slight retracement, currently trading at $63,508.

Amid this price performance, Axel Adler Jr, an analyst from the on-chain analytics platform CryptoQuant, has shed light on the potential for Bitcoin to see a bigger rally shortly based on key indicators.

According to Adler, a significant shift observed in Bitcoin’s market activity appears to suggest that the crypto market might be gearing up for a bullish momentum soon.

One of the focal points of Adler’s analysis is the “Exchange Flow Multiple,” which plays a crucial role in understanding the movement of Bitcoin on exchanges.

This indicator measures the ratio between short-term (30-day) and long-term (365-day) Bitcoin inflows and outflows on exchanges. When this multiple declines, short-term exchange movements are considerably lower than long-term ones, which could point to decreased volatility.

Adler Jr elaborates on this by highlighting two primary factors that influence the decline of Bitcoin Exchange Flow Multiple. The CryptoQuant analyst mentioned Long-Term Holders Retaining Assets as the first factor.

Also referred to as “HODLers,” long-term Bitcoin holders when not actively trading their assets, preferring to hold onto them with the expectation of future price increases, can lead to a decline in exchange flow multiple.

The analyst also draws attention to the natural market correction and recovery process. The market typically needs time to stabilize after significant drops in Bitcoin’s price.

This stabilization period reduces exchange activity as investors wait for a clearer price direction. Adler Jr noted that a low exchange flow multiple in such contexts might reflect a “wait-and-see” attitude among investors, anticipating a favorable price shift before they re-enter the market actively.

Adler Jr’s analysis further indicates that the current behavior of the Exchange Flow Multiple resembles patterns seen before previous rallies. Notably, similar low levels of the indicator were observed before the major market uptrend in 2023.

The CryptoQuant analyst disclosed that if history were to repeat itself, the current situation might set the stage for the next significant upward movement in Bitcoin’s price.

Featured image created with DALL-E, Chart from TradingView