Bitcoin accumulation addresses see record inflows as correction risk looms: CryptoQuant

Bitcoin accumulation addresses are seeing record inflows after Bitcoin (BTC) rose to its all-time high of $69,000 and subsequently declined.

According to a weekly report from CryptoQuant, daily inflows into Bitcoin accumulation addresses have increased to 38,000 BTC, pushing the total holdings of such wallets to a record 1.5 million BTC.

Accumulation Addresses See High Inflows

Bitcoin accumulation addresses only purchase BTC and never sell. CryptoQuant said the increase in their digital asset holdings indicates strong demand.

The increase in Bitcoin accumulation address holdings correlates with the high demand of spot Bitcoin exchange-traded funds (ETFs), which has remained consistent over time. All ETFs except GBTC had accumulated around 360,000 BTC at the time of writing, representing 1.8% of the asset's total supply.

Analysts said the crypto market may be at the beginning of the cycle with new investors buying from older ones at higher prices. This development can be seen in a decline in Bitcoin supply, which has not moved in more than a year and is currently at 68%, compared to 70.5% in November 2023.

The risk of a BTC correction looms

As accumulation addresses and ETFs see record inflows, CryptoQuant reiterated its warning about the risk of a short-term price correction as BTC prices have risen too quickly compared to key on-chain indicators. One metric is the platform's bull-bear market cycle indicator, which indicated an overheated bull phase as BTC rose above $65,000.

In addition, Bitcoin miners are currently extremely overpaid, as shown by the Miner Profit/Loss Sustainability metric. Mining revenue has been increasing since December 2023 due to increased BTC valuation.

Short-term investors' unrealized profit margins are currently above extreme levels, at 57%, up from last week's 32%. Since a 40% profit margin signals a price correction, analysts expect selling pressure from these traders soon. This metric can also indicate a price correction if it falls below its 30-day moving average.

Additionally, some short-term investors have already started selling their assets to make profits. CryptoQuant's analysis found that this cohort of market participants have dumped their holdings in recent days at high profit margins not seen since February 2021, an average of 11%. This activity can also trigger high selling pressure in the crypto market.

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