3 key indicators suggest Bitcoin could drop to $ 40,000

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appears to be under strong selling pressure, suggesting that investors are preparing to cash in.

Key Takeaways Bitcoin recently rebounded from support to a high of $ 48,500. Regardless of the rally, on-chain metrics suggest a bull trap. A sustained close outside of the $ 46,000 to $ 51,000 range will determine where BTC goes next.

Bitcoin’s network activity suggests that a peak in profit taking is imminent. Still, only a decisive break from the $ 46,000 support level is likely to lead to a steep decline.

Bitcoin On-Chain metrics turn bearish

Bitcoin may soon experience a retracement.

The main crypto asset has rebounded nearly 4.6% in the past few hours after hitting a low of $ 46,300 on August 26. The sudden rally surprised investors, generating over $ 64 million in long liquidations across the board.

Despite the recent spike in volatility, several chain measures suggest that a massive sell off may be underway.

The behavior analysis platform Santiment recently recorded one of the largest Bitcoin flows to exchanges in more than two years. Around 1.68 million BTC was transferred to trading platforms, which “was tied for the biggest influx day ever.” Such market behavior coincides with a steady rise of over 60,000 BTC held on trading platforms since August 3.

The growing supply of Bitcoin on the stock exchanges may prepare investors to turn a profit soon, triggering a massive sell-off that pushes prices down.

When one considers the decreasing number of daily active addresses on the Bitcoin network, the influx activity on the exchanges becomes even more concerning.

Twitter user Nebraskan Gooner argues that an influx of buyers is usually determined by an increase in the number of new addresses created. But when this on-chain metric declines, it suggests less interest from retail investors. He wrote:

“[In 2018,] we never saw a significant influx of active portfolios until we finally hit bottom. Address business fell, fewer new market participants got involved (along with old ones) and volatility decreased as BTC deviated / corrected ”,

Now, the analyst believes that those who wanted to unload their Bitcoin on the market could already have done so and now expect “lower prices like in 2018”.

Bitcoin – Number of active addresses (7d moving average)

Another sign that shows investors might cash in is the growing supply of stablecoins on the exchanges, which recently hit a new all-time high at around $ 19.22 billion. Some market participants may argue that such a large spike is positive because it signals more dry powder in the system that could flow into Bitcoin.

Nonetheless, given the increase in the supply of BTC on the exchanges, the data suggests that investors are converting their holdings into cash.

While it’s still unclear where Bitcoin is heading next, it is crucial to pay attention to the $ 46,000 support level and the $ 51,000 resistance barrier. A decisive daily candlestick near the underlying demand wall could lead to a dip towards $ 40,000, while a sustained move above airline supply could lead to $ 57,000.

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