Analyzing Bitcoin's Liquidity Slowdown as Old Coins Re-enter the Market

Bitcoin's recent price rally appears to be losing momentum as long-held coins start circulating again, and liquidity in the market diminishes. The upcoming movements will likely hinge on how capital flows develop in the near future.

Key Takeaways

Movement of Old Coins: There has been a notable increase in transactions involving older, previously dormant Bitcoin (BTC) coins.
Liquidity Decline: The inter-exchange liquidity flow is weakening, which has historically indicated a shift toward slower market phases.
Price Indicators: Bitcoin's price remains near historical highs but is showing signs of potential consolidation as trading volumes and demand stabilize.

Bitcoin [BTC]

Bitcoin's Old Coins Are Moving Again

Recent data from Joao Wedson, CEO of Alphractal, indicates that Bitcoin has hit four distinct distribution alerts—an unprecedented situation in its history.

Bitcoin Trends Source: Alphractal

The Reserve Risk indicator, which monitors the activity of older, inactive coins, has consistently signaled sell opportunities since 2024. This trend reflects that early Bitcoin holders are gradually selling and returning BTC to the market.

Bitcoin Supply Flow Source: Alphractal

A significant portion of this supply seems to be directed towards exchanges, ETFs, and institutional investment channels, coinciding with a peak in market interest. These patterns have emerged late in previous cycles, often indicating a shift from rapid growth to a slower, more cautious market environment.

Is Liquidity Lagging Behind?

As older Bitcoin coins re-enter circulation, liquidity between exchanges is starting to weaken. The Inter-exchange Flow Pulse (IFP) has been trending downward, dropping below its 90-day moving average—a level that usually precedes slower or corrective phases in past cycles.

Source: CryptoQuant

Interestingly, Bitcoin's price is still hovering around cycle highs, even as the underlying liquidity is decreasing. This discrepancy has historically led to periods of consolidation rather than outright sell-offs. Without a rebound in inter-exchange flows, Bitcoin may face challenges in maintaining upward momentum in the near term.

Price Chart Analysis

As of the latest updates, Bitcoin is trading near $90,000 but remains below crucial short and long-term moving averages, indicating a loss of trend strength. The Relative Strength Index (RSI) shows no significant buying or selling pressure at this time. Additionally, on-balance volume has stabilized, suggesting a lack of new demand entering the market.

Bitcoin Price Analysis Source: TradingView

This suggests that Bitcoin might be entering a consolidation phase as it reassesses its next steps in the market.

Conclusion

The assessment indicates a complex market environment for Bitcoin, impacted by the flow of older coins and dwindling liquidity. Investors should remain vigilant as these factors can significantly influence Bitcoin's future movements.