These Two On-Chain Signals Precede Bitcoin Falls, Analyst Suggests

An analyst has suggested that two on-chain signals can be used to predict Bitcoin falls, as they appear to have historically preceded falls in the cryptocurrency.

Bitcoin sales of 7-10 year old coins increased recently

As pointed out by an analyst in a CryptoQuant post, BTC dumping of coins aged between 7 years and 10 years and ETH dominance increasing could be two signs to look for before the coin’s value falls.

The first indicator of relevance here is “Spent Output Age Bands”, which checks for chain movement of coins and tells us which age groups were responsible for them.

The various “coin age groups” in the market include coins based on the total time they sat idle before being moved or sold.

The group in question here is the “age 7 to 10” cohort. Using the output chart for this group therefore shows how many coins were moved that have previously been inactive for periods in this area. Here’s 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, the quant has marked the relevant trend points for this Bitcoin indicator as well as the corresponding BTC price.

The analyst explains that when the usage of the age group of 7 to 10 years exceeds 5000, BTC usually observes a downward trend in its value.

Of the 7 times the signal was seen over the last few years, only one time did not register a fall.

Ethereum dominance was also heightened in recent weeks

The second indicator that the analyst believes to be noteworthy is the “ETH dominance”, which is a measure of the overall share of crypto market capitalization for Ethereum.

The diagram below shows the trend in this calculation in recent years.

Looks like the value of the metric has been high recently | Source: CryptoQuant

It appears that Ethereum dominance exceeding the 20% mark has also been a bearish sign for Bitcoin during this period.

In conclusion, the analyst suggests that the proper use of these two indicators together can help investors prepare for downtrends in the future.

At the time of writing, Bitcoin’s price is hovering around $18.7k, down 16% in the last seven days. Over the past month, the crypto has lost 18% in value.

The chart below shows the trend in the price of the coin over the last 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