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An analyst has suggested that two on-chain signals could be used to predict Bitcoin declines, as they appear to have historically preceded declines in the crypto’s price.
Bitcoin Sales Of 7 Year-10 Year Old Coins Soared Recently
As noted by an analyst in a CryptoQuant afterBTC dumping of coins between 7 and 10 years and rising ETH dominance can be two signals to watch for before the coin’s value falls.
The first indicator of relevance here is the “Issued age bands for output‘, which checks for coin chain movements and tells us which age groups were responsible.
The different “coin age groups” on the market include coins based on the total time they were inactive before being moved or sold.
The group concerned here is the cohort “7 years to 10 years old”. The Spent output chart for this group therefore shows how many coins have been moved that were previously inactive for periods in this range. Here’s the chart for it:
The value of the metric seems to have spiked up in recent days | Source: CryptoQuant
As you can see from the chart, the quant has highlighted the relevant trend points for this Bitcoin indicator as well as the corresponding BTC price.
The analyst explains that when the spending of the age bracket of 7 to 10 years exceeds 5000, BTC usually observes a downward trend in its value.
Of the 7 times the signal has been seen in the past few years, only once did the price register a decline.
Ethereum dominance was also increased in recent weeks
The other indicator that the analyst believes is important is the “ETH Dominance”, which is a measure of the total crypto market cap market share for Ethereum.
The graph below shows the trend in this statistic over the past few years.
Looks like the value of the metric has been high recently | Source: CryptoQuant
It seems that Ethereum dominance crossing 20% has also been a bearish sign for Bitcoin during this period.
In conclusion, the analyst suggests that proper use of these two indicators in combination can help investors prepare for downward trends in the future.
At the moment of writing, The price of Bitcoin hovers around $18.7k, down 16% over the past seven days. In the past month, the crypto has lost 18% in value.
The chart below shows the trend in the price of the coin over the past five days.
BTC's value has plunged down over the last day | Source: BTCUSD on TradingView
Featured image from Bastian Riccardi on Unsplash.com, charts from TradingView.com, CryptoQuant.com