On-Chain Chip Pressure Revealed: BWTS Indicator Unveils Forced Selling Signals

According to BlockBeats, on December 6, on-chain data analyst Murphy released insights indicating that the Short-Term Behavior Weighted Trend Signal (BWTS) is a key tool for identifying genuine chip sell-offs. This indicator not only captures investor losses leading to BTC selling but more importantly tracks the deep chip pressure of "forced liquidation"—positions that long-term holders are compelled to sell due to market stress.

**How the BWTS Indicator Identifies Critical Turning Points**

Murphy's data analysis shows that when BWTS diverges from BTC price, it often signals an important turning point. When the indicator shows a large amount of chips being forcibly liquidated without pushing the price down, it may instead brew the potential for a rebound or even a reversal. This combination of "extreme pessimism but price resilience" has historically been a market bottom signal.

**Warnings from Historical Cases**

In May 2022, the Luna crash shocked the market, and the BWTS indicator was significantly off-course, with investor chip pressure reaching extremes. However, that time, the indicator failed to reverse in time and instead entered a prolonged bear market. This failed case reminds us that extreme signals do not necessarily mean an immediate rebound.

**Implications of the Current Pattern**

Interestingly, Murphy points out that the current BWTS pattern bears a high resemblance to historical ones, also indicating signs of forced chip sell pressure. The difference is that BTC is currently trading around $87.68K, and the overall market environment differs from the past. Based on data analysis, this time there are conditions for a rebound, but a reversal trend has not yet fully unfolded.

**Trader’s Takeaway**

The value of the BWTS indicator lies in its ability to materialize intangible chip pressure. When forced liquidation signals appear, it indicates that market participants are trading under extreme emotions. Paying attention to divergences between the indicator and price can often reveal clues of an impending reversal.