July marked a milestone for Bitcoin (BTC), which reached an all-time high of $123,000, but the euphoria was short-lived. A sharp drop brought its price to $112,000, stabilizing around $113,000 today.
Three internal factors, beyond the global macroeconomic situation, triggered this correction, according to on-chain data .
The first blow came from a liquidity crisis on exchanges. In mid-July, the liquidity pool ratio collapsed, represented by the number of months of liquidity available for sale on platforms (blue line), reaching levels not seen in over three months. This indicator reveals a shortage of BTC available for sale .
"In healthy markets, this would drive prices up due to scarcity, but the opposite happened," explains an analysis by Arab Chain, a partner of the on-chain data platform CryptoQuant.
Without strong buying demand, the market became fragile, unable to absorb small sell orders without prices plummeting . This dynamic, similar to that of "thin" markets, amplified the impact of bearish moves.
The following chart is a clear visual representation of the three on-chain factors that contributed to Bitcoin's recent price correction in July, showing a drastic decrease in available liquidity, unstable ETF demand, and insufficient accumulation by smart wallets. These elements combined left Bitcoin vulnerable.
Several key metrics influence Bitcoin's price over time. Source: CryptoQuant.
Erratic demand for Bitcoin ETFs
On the other hand, demand for Bitcoin ETFs in the United States showed instability. After weeks of positive flows, July brought sharp spikes in inflows, followed by sharp declines.
"There was no alternative demand to offset this decline," the analyst notes. The outflow of $404 million from mutual funds, including cash ETFs, last week weakened price support.
While net inflows of $12.2 billion over the past 30 days, equivalent to 50% of the annual total reflect moderate profit-taking, the lack of consistency in institutional flows opened the door to a correction.
Weak accumulation of smart portfolios
Finally, the accumulation of Bitcoin by "smart portfolios" (the pink area in the chart above) failed to offset the decline. Although some addresses showed buying, the pace was slow and steady, with no significant increases. This type of investor stores select assets that follow a specific theme or strategy, in this case focused on BTC.
"There was latent demand, but it was neither active nor synchronized with the timing of the decline," the analysis indicates. This limited accumulation failed to provide robust support in a market weakened by low liquidity and ETF instability.
The combination of these factors, a liquidity crisis, intermittent ETF demand, and insufficient accumulation left Bitcoin vulnerable. On-chain data reflects a market that, despite its historical strength, faced an internal storm that caused it to lose ground after its recent peak.
