One Bitcoin (BTC) metric is signaling potential concern for the flagship crypto asset, according to new insight from market intelligence firm Swissblock.
In a post on the social media platform X, Swissblock highlights a sudden plunge in on-chain liquidity, something the firm says needs to reverse if BTC should rally.
“At the same time as the rest of the market has consolidated back into BTC, we have seen a drop off in our on-chain liquidity.
For bullish continuation, we need to see an uptick again in on-chain liquidity.”
On-chain liquidity refers to how easily and efficiently Bitcoin can be bought or sold without significantly impacting BTC’s price. Low liquidity environments suggest that there are not enough buyers to absorb sell orders, triggering price declines.
Swissblock says that the fast drop in liquidity by itself is “a concern” and that BTC is showing a reduction in overall activity in the Bitcoin network.
However, the analytics firm says that BTC’s long-term bullish market structure still looks solid.
“Lower liquidity as price is more correlated with on-chain dynamics vs external factors. Lower activity making price more susceptible to downside volatility..
All is not lost. Even though we have had a liquidity flush, the bullish long-term structure is still intact as long as our Risk off signal is at 0…
While liquidity conditions have deteriorated, the broader bullish structure remains intact – provided risk signals continue to hold.”
At time of writing, BTC is trading at $101,833.
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