- The Bitcoin UTXO increased, suggesting a hike in institutional activity.
- BTC may be underpriced and a rapid recovery could be on the cards.
Bitcoin’s [BTC] long-standing consolidation may have the entire market frustrated. But the growth in the Unspent Transaction Output (UTXO) offers a glimmer of hope that respite may be near. For context, the UTXO model is a fundamental element of Bitcoin showing transaction output that has not been utilized as an input in a new transaction.
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OTC players get into the game
According to Korean Trader Mignolet, the rise in the UTXO could be connected to increased wallet activity and very active Over-The-Counter (OTC) trading. Mignolet, in his CryptoQuant analysis noted,
“Most noticeable data during the frustrating price consolidation period that has been ongoing since the second quarter is the UTXO count, and the entities capable of such behavior are institutions or whales.”
The analyst opined that despite high volatility, it is not unusual to expect withdrawals. But this time, the OTC withdrawals were as high as 230,000 BTC. And after another 90,000 BTC followed.
Another metric to look at is the percentage of UTXO in profits. By definition, this metric shows the percentage of the total set of UTXOs in profit. The higher values of the UTXO in profit suggest market tops while lower values of the UTXO in profit suggest market bottoms.
BTC is underpriced and traders are bullish
At press time, UTXO in profits had fallen massively. This decrease implies that Bitcoin may be currently undervalued. And also, it may be time for investors willing to gain in the short term to start accumulation.
In summary, Mignolet compared the OTC trading activity and UTXO data to conclude that Bitcoin may soon revive. His exact words read,
“Even if further price declines occur, there is a high likelihood of a rapid price recovery.”
On looking at the Bitcoin funding rate, it seemed that traders also shared the sentiment that a recovery might soon occur. Funding rates, as the name suggests, are periodic payments held between long and short traders that hold perpetual positions in the market.
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A positive funding rate suggests that the broader sentiment is bullish while a negative sentiment suggests that shorts are paying longs to keep their contracts open. Hence, a bearish sentiment. As of 2 September, the Bitcoin funding rate was down to -0.002%.
Therefore, a move toward the positive region implies that the initial bias traders have changed. At the time of writing, BTC exchanged hands at $25,999— a slight increase from the value in the last 24 hours.