Posted:
- The Bitcoin UTXO rose, indicating an increase in institutional activity.
- BTC may be underpriced and a quick recovery could be on the cards.
Bitcoins [BTC] prolonged consolidation can frustrate the entire market. But the growth in Unspent Transaction Output (UTXO) offers a glimmer of hope that a reprieve is near. For context, the UTXO model is a fundamental element of Bitcoin that shows transaction output that has not been used as input for a new transaction.
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OTC players come into play
According to Korean trader Mignolet, the rise in the UTXO could well be connected to increased wallet activity and highly active Over-The-Counter (OTC) trading. Mignolet noted in his CryptoQuant analysis:
“The most salient data during the frustrating price consolidation period that has been underway since Q2 is the UTXO counts, and the entities capable of such behavior are institutions or whales.”
The analyst believed that despite high inconstancy, it is not unusual to expect withdrawals. But this time, OTC withdrawals totaled a whopping 230,000 BTC. And then another 90,000 BTC followed.
Source: CryptoQuant
Another metric to look at is the percentage of UTXO in earnings. By definition, this stat shows the percentage gain of the total set of UTXOs. The higher values of the UTXO in profit indicate market tops, while lower values of the UTXO indicate profit to suggest bottoms of the market.
BTC is underpriced and traders are bullish
At the time of writing, UTXO’s profits had plummeted. This decline implies that Bitcoin may be currently undervalued. And also, it may be time for investors looking to make short-term profits to start accumulating.
Source: CryptoQuant
In summary, Mignolet compared OTC trading activity and UTXO data to conclude that Bitcoin could soon revive. His exact words are:
“Even if there are further price drops, the chances of a quick price recovery are high.”
If we look at the Bitcoin financing rateit seemed that traders also shared the sentiment that a recovery could be imminent. Funding rates, as the name suggests, are periodic payments between long and short traders who take perpetual positions in the market.
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A positive funding rate indicates that the broader sentiment is bullish, while a negative sentiment suggests that shorts are paying longs to keep their contracts open. Therefore one bearish sentiment. As of September 2, the funding rate for Bitcoin had dropped to -0.002%.
Therefore, a move towards the positive region implies that the initial bias traders have changed. At the time of writing, BTC was trading hands at $25,999 – a slight increase from its value in the past 24 hours.
Source: Sentiment