Bitcoin in Dormancy Flow ‘Buy Zone’ For Sixth Time in its History

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  • The Bitcoin Dormancy Flow has indicated that Bitcoin is in a ‘buy zone’
  • The metric, which considers the movement of long-held coins, last fired in May 2021
  • The chart shows that price increases often follow drops into the buy zone

Bitcoin is in the ‘buy zone’ according to a metric that has only fired such a signal on five other occasions since 2011. The Dormancy Flow chart shows Bitcoin’s market cap compared to the USD value of annualized destruction, which refers to the amount of time coins are held in wallets, and current data suggests that a price reversal could be imminent following Bitcoin’s drop from $69,000 to $39,500 over the past two months.

Dormancy Flow Data Focuses on Coin Movement

The Dormancy Flow chart, posted by Blockware Lead Insights Analyst Will Clemente, shows that the past few weeks have seen long term investors gobbling up more bitcoin in the $40,000s region while holding their existing stash. Conversely, in the lead up to the May and November 2021 highs, these same holders were sending their bitcoin to exchanges to be sold:

Clemente’s chart shows that Bitcoin has hit five ‘buy zones’ in the past 11 years, with the latest being July 2021 when it fell to $30,000. Price has rallied on the past five occasions when it has done this, with buy zones often coinciding with sudden short term drops in price, for example January 2015 and March 2020, when these whales grabbed more on the drops.

The data suggests that such accumulation is once again taking place, with the drop through $40,000 potentially acting as this most recent example of a quick bitcoin grab.

Data Ties in With Bitcoin Chart Action

Of course we can’t be sure that history will continue to repeat itself, and a period of sideways action typically follows Bitcoin exiting these buy zones, but this data does seem to match up with the price action on the long term chart dating back to 2015:

bitcoin long term

Here we can see that Bitcoin bounced on the six year trendline, just as these big buyers stepped in. Coincidence? Only time will tell.