The Bitcoin price has been testing the $11,400 support area since August 26th. In the near term, two key on-chain metrics could raise the probability of an extended consolidation phase.

The last time Bitcoin repeatedly tested the $11,400 support level was August 12th. At the time, Bitcoin rebounded within 48 hours, eventually surging to as high as $12,468 on Binance by August 17th. Whether the current retest of the same support zone could lead to a deeper pullback remains to be seen.

Seller Absorption and Market Structure Are Critical For Bitcoin

Since April, Bitcoin has steadily climbed upwards from the mid-$6,000s to over $12,000. Throughout the past four months, buyers across major exchanges like Bitfinex quickly absorbed sell orders at key resistance areas.

If the Bitcoin price falls below crucial technical levels in the near term, such as $11,400 and $10,900, some traders say Bitcoin could see trouble. Citing the Bitfinex order book, pseudonymous trader Bitcoin Jack wrote:

“Finex [sic] sellers absorption. If it can't keep up this time, BTC is in trouble. If we repeat this behaviour, all is good.”

Buyers and sellers on Bitfinex on top of the Bitcoin price chart. Source: Bitcoin Jack

Some traders are turning cautious as Bitcoin shows signs of consolidation with weaker momentum than during previous weeks. Although Bitcoin has fallen since achieving a yearly peak of $12,668 on August 17th, a bullish market structure would remain intact unless Bitcoin drops below $10,900.

Slowing Network Activity in the Short Term

According to the on-chain market data provider Santiment, address activity on the Bitcoin network is slowing. Researchers at Santiment explained:

“BTC continues its caution flags with its low level of address activity on its network. The -3.7% price was surely related to this metric's -19.3% decline since its peak of 1.13M active addresses back on August 6th. Watch for hints of a turning point here.”

The daily active address trend on the Bitcoin network. Source: Santiment

The daily address activity in relation to Bitcoin’s price trend indicates that while Bitcoin has seen a price increase since April, user activity on the Bitcoin blockchain has remained stagnant. 

The term address activity on Santiment’s chart refers to the daily activity of all addresses on the Bitcoin blockchain network.. Meanwhile, niche metrics, like HODLing activity, counts addresses that have not moved for 1 to 2 years.

In a bullish market cycle, it is favorable to have the network activity supplement the rising price. 

Despite the apparent weakness in some near-term on-chain indicators, the BTC Times reported that longer-term macro data such as HODLing activity and Bitcoin exchange reserves has significantly strengthened.

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