Will BTC continue its ongoing decline?

• Bitcoin price is above the $58,700 level; a daily close below this would give more legs to the bear trend.
• U.S. spot Bitcoin ETFs saw three consecutive days of modest outflows this week, totaling $103.8 million.
• Bitcoin Exchange Netflow data shows that 61,715.3 BTC were removed from exchanges and stored in holders’ wallets.
• On-chain data shows that BTC’s Coinbase Premium Index is down and P/L on the network has increased, contributing to the bearish trend.

Bitcoin (BTC) is trading above $59,000 on Friday, but has lost 7.5% this week so far after being rejected around the $65,000 daily resistance. The decline is supported by lower demand from U.S. spot Bitcoin ETFs, which saw a net outflow of $103.8 million, declines in the Coinbase Premium Bitcoin Index, and an increase in network realized P/L. However, some investors seem to be taking the chance to buy BTC amid this price drop, as shown by Exchange Netflow data.

U.S. spot Bitcoin ETFs see modest exit

Institutional flows did not support the price of Bitcoin this week. According to Coinglass data, U.S. spot Bitcoin ETFs saw inflows earlier in the week, but saw three consecutive outflows through Thursday, totaling $103.8 million in net outflows. Net flows can help gauge investor sentiment toward Bitcoin, but when they’re small — like this week so far — they’re less meaningful, given that the total Bitcoin reserves held by the 11 U.S. spot Bitcoin ETFs are of USD 43.38 billion.

Bitcoin ETF Netflow chart

Bitcoin investors buy despite falling prices

CryptoQuant Exchange Netflow data shows the difference between coins flowing into and out of exchanges. An increase in exchange inflows (a positive value) is mostly bearish, while an increase in exchange outflows (a negative value) is mostly bullish.

In the case of BTC, the net flow through Thursday was -61,715.3 BTC, indicating that 61,715.3 BTC was taken out of exchanges and stored in holders’ wallets, despite Bitcoin’s recent decline. This suggests buying activity and reducing selling pressure.

Bitcoin Exchange Netflow Chart

Chain data shows negative bias

CryptoQuant’s Coinbase Premium Bitcoin Index shows the difference between the Coinbase Pro price (USD pair) and the Binance price (USDT pair). Coinbase Premium data is one of the indicators showing a sign of whale accumulation as the Coinbase Pro platform is considered the gateway for institutional investors to purchase cryptocurrencies.

For Bitcoin, the index fell from 0.077 to 0.009 from August 24 to August 29, trading below its 14-day simple moving average (SMA) at 0.024. This indicates that whales are continuously selling at a lower premium. Additionally, it shows a decline in investor interest and activity in Coinbase.

Coinbase Premium Bitcoin Index Chart

On-chain data provider Santiment’s Network Realized Profit/Loss (NPL) Indicator calculates a network-wide return on investment (ROI) daily based on the coin’s on-chain transaction volume. Simply put, it is used to measure market pain. Strong increases in a coin’s NPL indicate that its holders are, on average, selling their baggage at a significant profit. On the other hand, sharp declines imply that coin holders are making losses on average, suggesting panic selling and investor capitulation.

In the case of BTC, the NPL indicator increased from -32.99 million to 1.02 billion from Wednesday to Thursday. This positive growth indicates that holders have, on average, taken profits and increased selling pressure in BTC.

Profit/loss graph made on the Bitcoin network

Will BTC Continue Downtrend?

Bitcoin price rejected around the daily resistance level at $65,379 on Sunday and is down 8% since the beginning of this week. At the time of writing on Friday, it is trading up slightly by 0.3% at $59,507.

If BTC continues to decline and close below the $58,783 level, it could further decline by 4.5% to retest the daily support at $56,002.

The Relative Strength Index (RSI) and the Awesome Oscillator (AO) on the daily chart have dipped below their neutral levels of 50 and zero, respectively. Both indicators suggest momentum is slightly weakened.

BTC/USDT Daily Chart

However, let’s assume Bitcoin price finds support at around $58,700 and closes above $62,042, its 61.8% Fibonacci retracement level (drawn from a high in late July to a low in early August) , the bear thesis will be invalidated. In this scenario, BTC could rise by 5.5% to revise its daily resistance level at $65,379.