On-chain data shows that Bitcoin investors have recently shifted towards aggressive accumulation, which could help sustain the rally for longer.
Bitcoin Accumulation Trend Score is trending towards 1 lately
According to data from on-chain analytics firm Glassnode, there is a structural similarity between the current BTC cycle and the 2018-2019 cycle. The indicator of interest here is the “accumulation trend value”, which tells us whether bitcoin investors have been accumulating or disbursing over the past month.
The value of this metric represents not only the number of coins that the holders are selling or buying, but also the wallet sizes of the entities participating in the accumulation or distribution trends.
When the accumulation trend value has a value close to the 1 mark, it means that the big companies (or a large number of retail investors) are currently accumulating the asset.
On the other hand, the indicator with readings close to the 0 level suggests that holders are currently paying out (or alternatively just not accumulating much).
Now here is a chart showing the trend of bitcoin accumulation trend over the past few years:
The value of the metric seems to have been close to the one mark lately | Source: Glassnode on Twitter
As shown in the chart above, the bitcoin accumulation trend score had turned shades of yellow/orange during the first few months of the recent rally. This means that the metric was close to 0 at the time, indicating a large amount of distribution from the large entities was taking place.
This suggests that investors may not have thought this rally would last all that long, so they are reaping the gains while they still could. However, the trend has changed during the last leg of the rally that has brought the price close to $30,000.
Interestingly, the trend the current rally is following appears to be similar to that seen during the April 2019 rally. This other rally, just like the current one (if indeed the worst of the bear this cycle lags the asset), started from the bear market lows and it also faced a strong propagation in its early stages.
As the April 2019 rally neared the “cycle baseline” (a price that supported the asset several times during this cycle), investor behavior shifted towards strong accumulation as the indicator turned dark purple (readings very close to 1).
As can be seen from the chart, the April 2019 rally gained significant bullish momentum after this accumulation started. As mentioned earlier, the recent bitcoin rally has also shifted in the direction of accumulation lately as the price neared $30,000.
The $30,000 level happens to be the baseline of the current cycle, meaning that this structure the market is observing is reminiscent of what was seen in the 2018-2019 cycle.
If the rest of the rally shows a similar pattern to April 2019, then investors’ recent shift towards accumulation could be positive news for the price advance.
BTC price
At the time of writing, Bitcoin is trading around $28,300, up 1% over the past week.
BTC has been mostly sideways lately | Source: BTCUSD on TradingView
Featured image of Kanchanara on Unsplash.com, charts by TradingView.com, Glassnode.com
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