Bitcoin’s Accumulation Trend Score Signals Prolonged Distribution Phase

Bitcoin’s (BTC) market has been ruled by a long distribution phase, with the cryptocurrency’s Accumulation Trend Score staying under 0.5 for 58 consecutive days.

This distribution has lasted long enough to start raising questions about what the big players in the Bitcoin market are up to, with the latest data indicating that they’re still mostly heading in the direction of offloading, and that Bitcoin is a still seemingly entrenched in a relatively actuarial phase of distribution when compared with the overall phase of the market.

The Accumulation Trend Score that follows the market’s buying and selling behavior tells us whether Bitcoins are being accumulated or distributed. Above 0.5, and we can say that there is a net buying interest; below 0.5, and there is a net selling interest. Bitcoin’s score hasn’t been able to cross above the 0.5 threshold since the collapse of the FTX crypto exchange in November 2022. While past performance is not necessarily indicative of future results, the mere presence of a score below 0.5 doesn’t inspire confidence in either Bitcoin or the crypto market in general.

Historical Context of Bitcoin’s Accumulation and Distribution Cycles

The current distribution streak is remarkable as it nears the average length of such phases seen in the past year. On average, Bitcoin has spent 196 days in distribution and 170 days in accumulation over the past 12 months. The average length of a distribution phase has been 65 days, while an accumulation period tends to last around 57 days. The alternating nature of these phases, which typically ranges between 57 and 65 days, indicates a somewhat cyclical trend in the behavior of large Bitcoin holders. This seems to suggest that, while we are not in an accumulation phase, we are also experiencing a distribution phase that is much longer than the average.

Bitcoin’s latest Accumulation Trend Score reading is at 0.9, indicating that large entities still find themselves in a net distribution phase. Even with the recent price fluctuations—dips followed by rallying reversals—there’s been no apparent movement among these significant holders to suggest they’re shifting back into an accumulation ethos. Instead, the even more revelation-prone quarterly reports of public companies that for some reason hold Bitcoin and the buying decisions of privy-to-an-Ontario-court’s-stay-in-title-for-18-months Order cash custodians reveal that large entities ‘appear to continue taking profits and decreasing their on-exchange balance sheets.’

Implications of Prolonged Distribution for Bitcoin’s Price

The lengthy distribution period could have a meaningful effect on Bitcoin’s price in the near future. When large entities are selling, commentators often say they are in a distribution phase. At such times, they typically have a lot of market orders to place. In other words, they’re not placing limit orders and buying with the market; they’re interacting with the market in a way that could very well lead not only to horizontal price action but even to price declines. It seems the entities that have been distributing Bitcoin haven’t yet finished doing so.

In addition, the reality that Bitcoin has spent a larger portion of the past year in distribution—rather than in accumulation—might suggest that the market is in a corrective phase. With a seemingly declining number of entities willing to hodl Bitcoin for the long haul, the total demand for the asset certainly appears to be faltering. And it looks as if the retail sector may be becoming as skittish as the institutional sector. The prolonged distribution phase could be interpreted as a Bitcoin price that might be heading lower for a longer period of time.

That said, distribution phases are a natural part of Bitcoin’s market cycles. They are not something to fear or be overly concerned about. They are necessary if Bitcoin is to continue to function as a truly free and open global monetary network. In many cases, once distribution has occurred, an accumulation phase follows, often with renewed price momentum to the upside accompanying it. And, of course, this is what we all want—Bitcoin’s price to head back upward after making corrections.

A Waiting Game for Bitcoin’s Next Cycle

At present, the data indicates that Bitcoin remains in a distribution phase. However, it also highlights the possibility of a shift in market sentiment. The average length of a distribution phase over the past year has been approximately 65 days. Therefore, it is within the realm of possibility that we could see the market shift toward accumulation very soon, with large investors stepping in to buy. If that happens, it can only be seen as a positive development for Bitcoin prices.

Currently, the market is in a state of careful observation. Many investors are waiting for a signal that the distribution phase is over. Bitcoin’s trend score is 0.9. This indicates that large entities are still predominantly selling Bitcoin. Of course, if conditions change, this situation could also change.

To conclude, Bitcoin is presently working through a drawn-out distribution phase, with the market’s Accumulation Trend Score sitting below 0.5 for more than two months. This net selling corresponds with what we usually see in the historical Bitcoin record, could have bearish near-term consequences for the Bitcoin price, and—if you look at the same picture as far as time goes forward—could lead to another renewed bullish cycle in a few months.

For now, all eyes are on the score to see what the next phase might be.

Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any services.

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