Bitcoin's Bullish Structure Faces Challenges as Inter-Exchange Liquidity Dips

The Bitcoin market is currently showing signs of a potential trend reversal after enduring weeks of a prolonged price correction during October and November. Recent on-chain data highlights some concerning developments regarding BTC’s bullish structure.

Key Takeaways

Trend Reversal: Bitcoin is undergoing a gradual trend reversal after significant price corrections.
Inter-Exchange Liquidity: The Bitcoin IFP has dropped below the 90-day moving average, indicating weaker market participation.
Price Sensitivity: The current price of Bitcoin remains notably high, but ongoing movements are potentially disconnected from inflow trends.
Market Outlook: Continued bullish momentum is contingent upon reclaiming the 90-day moving average of the IFP.

Bitcoin

Despite a recent recovery in Bitcoin's price, warning signs indicate that the bullish momentum might be weakening due to declining inter-exchange liquidity. The Bitcoin Inter-Exchange Flow Pulse (IFP) is trending downwards, suggesting a lack of bullish flows and potential volatility ahead.

Bitcoin IFP Indicator Signals a Possible Turning Point

A recent analysis from the popular analytics platform Arab Chain warns about the Bitcoin market's current state, despite its modest price recovery. After experiencing a steep correction of 36.5% from its peak at $126,000, Bitcoin has bounced back, climbing from $80,000 to $94,000 over the past three weeks. However, insights from the Bitcoin Inter-Exchange Flow Pulse (IFP) indicate that this upward momentum may be fleeting.

The IFP tracks the net movement of Bitcoin between exchanges over time. According to Arab Chain, the IFP has continued its downward trend after falling below its 90-day moving average (MA). This trend showcases a reduction in market participation, marked by fewer “bullish” flows returning to exchanges. Notably, the current IFP reading sits in the red zone, a historical indicator that typically aligns with a correction phase or foreshadows weak momentum that could lead to a broader market downturn. This combination of factors suggests that Bitcoin is at a critical crossroads, marked by diminishing exchange flows that have previously supported price rallies.

Bitcoin
Source: CryptoQuant

Is the Bullish Trend Coming to an End?

Given the structural weaknesses signified by the IFP, Arab Chain also observed that Bitcoin's price remains relatively elevated compared to past situations with similar dynamics. The analysts indicate that there’s a disconnect between price action and inflows at this moment. History shows that such discrepancies often lead to extended periods of price consolidation or a lengthy phase of sideways movement until the inter-exchange flows regain their influence over the market.

Thus, while the Bitcoin bullish structure has not completely transitioned to a bearish state, the developments in the IFP suggest that we may not see sustained price increases in the near term due to the slowdown in inter-exchange liquidity. Additionally, the price could become increasingly reactive to changes in market liquidity, which hints at the potential for another price correction.

As of the latest data, Bitcoin is trading at $90,338, which marks a decline of 1.82% over the past 24 hours. On a positive note, daily trading volume has surged by 34.64%, currently valued at $82.68 billion. Arab Chain contends that a more decisive price rebound will only materialize if the IFP can recapture its 90-day MA, indicating a resurgence of bullish exchanges flows.

Bitcoin
BTC trading at $90,376 on the daily chart | Source: BTCUSDT chart on Tradingview.com