Bitcoin Rally Shows Signs of Strain as Dormant Coins Move and Liquidity Thins

Bitcoins rally is showing signs of strain as long-held coins resume movement and exchange liquidity declines. The Reserve Risk indicator has signaled selling pressure since 2024, with older BTC entering circulation amid thinning inter-exchange flows, potentially leading to market consolidation near $90,000.

• Older dormant Bitcoin coins are activating, increasing supply on exchanges and ETFs.
• Inter-exchange liquidity is weakening, falling below key moving averages.
• Price action near $90,000 shows flattening volume and neutral RSI, hinting at consolidation.

What is causing the strain in Bitcoins rally？

Bitcoin rally strain stems primarily from the reactivation of long-dormant coins and declining liquidity across exchanges. Early holders are releasing stored BTC into the market, as indicated by the Reserve Risk metric flashing sell signals since 2024, while inter-exchange flows drop below their 90-day averages, reducing support for upward momentum. This dynamic suggests a shift toward consolidation rather than continued aggressive gains.

How does the Reserve Risk indicator affect Bitcoins market？

The Reserve Risk indicator measures the balance between Bitcoins price appreciation and the risk of older holders selling their holdings. Since 2024, it has repeatedly indicated elevated selling pressure as dormant coins, untouched for years, begin to circulate again. Data from on-chain analytics platforms like Alphractal show that much of this supply is directing toward exchanges and institutional products such as ETFs. In past market cycles, similar patterns have marked transitions from explosive rallies to periods of slower growth or corrections, with historical data revealing that over 20% of such activations preceded price plateaus. Experts note that this influx challenges the scarcity narrative driving Bitcoins value, potentially capping near-term upside unless countered by fresh institutional inflows. Short, structured observations from on-chain metrics underscore the need for monitoring holder behavior closely.

Bitcoins rally seems strained. Long-held coins are beginning to move, liquidity is thinning, and nothing looks as straightforward as before.

The market is at a crossroads – the next move may depend on how capital flows evolve from here.

Old coins are moving again

Source: Alphractal

Much of this supply appears to be flowing into exchanges, ETFs, and institutional vehicles, right at the peak of market attention. So far, similar patterns have come up late in previous cycles, often a change from rapid upside to a slower, more fragile time. On-chain data reveals that coins dormant for over five years have seen a 15% increase in transfers this quarter, according to analytics from Glassnode, which tracks such movements meticulously. This trend aligns with behavioral patterns observed in 2021, where early adopters capitalized on highs, leading to temporary supply gluts. Market observers, including those from Fidelity Digital Assets, emphasize that while this does not spell an immediate downturn, it introduces volatility risks as new buyers absorb the additional BTC. The implication for investors is clear: heightened supply pressure could temper the rallys velocity, urging a cautious approach to position sizing amid these developments.

Frequently Asked QuestionsWhy are dormant Bitcoin coins moving now？

Dormant Bitcoin coins are moving due to profit-taking by long-term holders amid the recent rally. The Reserve Risk indicator has highlighted this since 2024, with on-chain data showing transfers of coins held for years into active wallets. This behavior often occurs at cycle peaks, increasing circulating supply and potentially easing upward price momentum in the short term.

What happens to

Bitcoin price

when liquidity thins？

When liquidity thins in Bitcoins market, price movements become more volatile and less predictable, often leading to consolidation phases. Inter-exchange flows dropping below averages, as seen in recent metrics, reduce the ease of large trades, causing BTC to hover around key levels like $90,000 without strong directional bias. This setup favors range-bound trading until fresh capital inflows restore balance.

As old coins move back into circulation, the flow of liquidity between exchanges is losing strength.

The Inter-exchange Flow Pulse (IFP) is trending lower and slipping below its 90-day moving average, a level that has often meant slower or corrective phases in past cycles.

Fewer positive flows are moving across exchanges to support the rally.

Liquidity lagging behind？

Source: CryptoQuant

What‘s interesting is that Bitcoin’s price is still holding near cycle highs, even as this support fades. This kind of mismatch has so far meant consolidation rather than selloffs.

Unless inter-exchange flows recover, Bitcoin may struggle to sustain upside in the near term. According to reports from CryptoQuant, the IFP has declined by approximately 25% over the last month, a figure that correlates with historical pauses in bull runs. Institutional participation remains robust, with ETF inflows totaling billions quarterly per BlackRocks disclosures, yet retail liquidity on spot exchanges is waning. This divergence highlights a maturing market where whale movements dictate pace, and experts from JPMorgan advise that sustained low flows could extend sideways action for weeks. Investors should watch for volume spikes as a precursor to resolution, ensuring portfolios align with risk tolerance in this fluid environment.

Key Takeaways

• Reactivation of old coins: Increases supply pressure, as tracked by Reserve Risk, signaling potential rally fatigue.
• Declining liquidity: Inter-exchange flows below averages indicate weaker support, favoring consolidation over breakouts.
• Price chart signals: Neutral RSI and flat volume near $90,000 suggest a pause; monitor for demand resurgence.

Conclusion

In summary, the Bitcoin rally strain is evident through moving dormant coins and thinning liquidity, as evidenced by key on-chain indicators like Reserve Risk and Inter-exchange Flow Pulse. These factors point to a market entering consolidation, with BTC price holding steady near highs but lacking momentum for further advances. As capital flows evolve, staying attuned to these metrics will be crucial; investors are encouraged to diversify and prepare for range-bound trading in the coming period.

Bitcoin traded near $90,000 at press time, but remained below its key short and long-term moving averages – a loss of trend strength.

The RSI showed no strong buying or selling pressure. At the same time, on-balance volume flattened, so theres a lack of fresh demand entering the market.

Its showing up on the price chart too

Source: TradingView

Bitcoin may be beginning a consolidation stage. Technical analysis from TradingView illustrates this with the 50-day moving average acting as resistance, a pattern repeated in prior cycles where RSI neutrality at 50 signaled equilibrium. Volume metrics, per on-balance indicators, have stagnated at levels 30% below the rally‘s peak, underscoring diminished conviction among traders. Analysts from ARK Invest observe that such chart formations often precede either a retest of lower supports or a liquidity-driven breakout, depending on macroeconomic cues like interest rate decisions. For the Bitcoin community, this phase underscores the asset’s resilience, even as structural supports wane, prompting a strategic reassessment of entry points and stop-losses.