Bitcoin’s recent dip below $75k coincided with a spike in Exchange Inflow CDD, prompting questions about market sentiment and liquidity trends. The increase in CDD could signify long-term holders losing confidence or a strategic move to shift liquidity. While rising CDD typically precedes sell-offs, it could also indicate capital moving into derivatives for hedging or leverage. If inflows continue at elevated levels, selling pressure may intensify, but if it’s just repositioning, Bitcoin could be gearing up for its next volatile move.
Historical data shows that CDD spikes have led to mixed outcomes in the past. While some spikes have preceded sharp corrections, others have resulted in Bitcoin rallying post-spike, suggesting smart money repositioning rather than panic selling. For example, a notable CDD surge on February 22 correlated with a 19% BTC drawdown within a week. However, on March 5, Bitcoin surged to a new all-time high following a red candlestick, indicating a potential exhaustion shakeout before a price continuation.
During the recent spike in Exchange Inflow CDD on April 6, older BTC was moved to exchanges, raising concerns about a potential correction similar to February or a resilient bounce like in March. Despite the spike, Bitcoin rebounded the next day, hinting at market absorption of the initial liquidity wave. On-chain data shows a decline in Short-Term Holder supply to a four-month low, while Long-Term Holder supply remains steady, signaling continued long-term conviction. Funding Rates are also in line with March levels, indicating that derivatives activity is influencing price action.
With Open Interest surpassing $51 billion and Funding Rates skewed towards longs, there is potential for overleveraged positions to face liquidation if Short-Term Holders continue selling off. However, despite the CDD spike, there has been no significant sell-off pressure yet. If Bitcoin follows the structure of its March rally, it could quickly reclaim lost resistance levels. This suggests that the current market dynamics may lead to a recovery rather than a deep correction.
In conclusion, the recent spike in Exchange Inflow CDD has raised questions about Bitcoin’s short-term trajectory. While historical data shows mixed outcomes following CDD spikes, current on-chain trends and market dynamics suggest that Bitcoin could potentially recover from its recent dip and continue its upward trajectory. As long-term holders maintain their conviction and derivatives activity plays a significant role in price action, Bitcoin may avoid a major sell-off and instead see a rebound to previous levels. Monitoring key indicators like Funding Rates and Open Interest will be crucial in determining Bitcoin’s next move in the coming days.
