Bitcoin’s Bullish Momentum: Supply on Exchanges Plummets
The recent inflow of Bitcoin (BTC) in the last two quarters has sparked a surge in bullish sentiment in the market, leading to increased activity surrounding the leading cryptocurrency. New data from cryptocurrency analytics firm CryptoQuant reveals a significant drop in Bitcoin supply on exchanges over the past four years, with a nearly 40% decrease since 2020. This decline indicates a heightened bullish momentum in the market.
Historically, the movement of assets off exchanges suggests a general bullish sentiment, while an inflow to exchanges indicates a prevailing bearish sentiment. This is because assets held on exchanges are more likely to be sold compared to those held by other custodians and miner reserves.
“More Bitcoin is being bought and HODL’d than is being mined, and this has been the prevailing trend since 2020. As we know with commodities, scarcity boosts perceived value. The new trend suggests that we won’t see a pronounced rise in supply towards the end of the cycle.”
The supply of Bitcoin on exchanges has now reached a five-year low, with analysts suggesting a supply shock. According to recent data from Glassnode, exchange supply stands at 2.3 million BTC, while around 3 million BTC remain unmoved for over a decade.
Spot Bitcoin ETFs Drive Bullish Sentiment
The approval of spot Bitcoin ETFs by the United States Securities and Exchange Commission (SEC) on January 10 is one of the main factors driving the current market upswing. This approval has created a new investment opportunity for traditional finance players to increase their exposure to Bitcoin.
As of now, inflows into crypto investment products have surpassed $13 billion this year, with Assets Under Management (AUM) reaching over $96.6 billion. Bitcoin products alone have seen $12.8 billion in inflows year-to-date (YTD), with an AUM of $76 billion.
According to CoinShares, Bitcoin investment funds have experienced weekly inflows of $2.8 billion, indicating a continued bullish trend despite minor sell-offs in recent days.
Analysts Point to the Halving
Cryptocurrency analysts at CryptoQuant suggest that the upcoming Bitcoin halving is another factor contributing to the bullish outlook. The halving, which is generally viewed as a bullish event, is set to take place in the coming days, with miners positioning themselves for a new reward price for the next four years.
In January, miners transferred over $1 billion worth of Bitcoin to exchanges, leading some commentators to believe that they were taking profits after previous lows. Others suggested that the movement to exchanges could be a hedge by miners to improve their capacity rather than an outright sale ahead of the halving event.
Hot Take: Bitcoin’s Bullish Momentum Continues
The recent decline in Bitcoin supply on exchanges and the approval of spot Bitcoin ETFs have fueled a strong bullish sentiment in the market. With more Bitcoin being bought and held than being mined, scarcity is boosting its perceived value. The upcoming halving event further contributes to this bullish outlook.
As traditional finance players increase their exposure to Bitcoin through investment products, inflows into crypto continue to surge. Despite minor sell-offs, the overall trend remains bullish. The market is witnessing a supply shock, with Bitcoin supply on exchanges at a five-year low.
This combination of factors indicates that we may not see a significant increase in supply towards the end of this cycle, further driving up Bitcoin’s value. As investors position themselves for the halving event, the bullish momentum is expected to continue.
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