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According to data from CryptoQuant, Bitcoin (BTC) reserves on cryptocurrency exchanges have fallen to their lowest level in several years. This decline coincides with the ongoing bull market, which has pushed the price of the digital asset closer to the $100,000 mark. This significant decline could have significant implications for the dynamics of asset supply and demand.
Is investor confidence in Bitcoin increasing?
During a bull market, Bitcoin reserves on exchanges increase as long-term (LTH) and short-term (STH) Bitcoin holders move their holdings to trading platforms to take profits. However, the current bull market is breaking this trend, as Bitcoin exchange reserves are dwindling.
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Data Cryptoquant reports that more than 171,000 bitcoins have been withdrawn from cryptocurrency exchanges since pro-crypto Republican candidate Donald Trump won the US presidential election in November. The large amount of Bitcoin being withdrawn from exchanges indicates that holders are likely to move their holdings to cold wallets, indicating long-term confidence in Bitcoin.
According to the chart below, Bitcoin exchange reserves saw a sharp decline starting in November 2022 – falling from 3.33 million BTC on November 5, to 2.93 million BTC on December 21.
Another notable decline began in February 2024, likely in anticipation of Bitcoin halving In April and the subsequent scarcity of supply of digitally programmed assets. During this period, reserves fell from 3.05 million BTC to 2.63 million BTC by October 30 – a decline of 13.77% over eight months.
Exchange reserves stand at just 2.46 million BTC, the lowest level in years. This continued decline indicates a potential supply crunch for Bitcoin, which could push its price higher in the coming months.
The illiquid supply of BTC continues to grow
Another data point that supports the hypothesis of holding Bitcoin long term is Glassnode Ilquid Supply Measure The chart below shows that the illiquid supply of digital assets has increased by 185,000 BTC in the past 30 days.
Notably, the illiquid supply now represents approximately 14.8 million BTC, which represents nearly three-quarters of the current circulating supply of 19.8 million BTC. If this trend continues, the price of Bitcoin could see a significant rise due to scarcity of supply. However, this may also lead to increased volatility.
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While lower exchange reserves and higher illiquid supply are long-term bullish indicators for Bitcoin, short-term price movements could see a short-term correction. According to According to cryptocurrency analyst Ali Martinez, BTC has formed a head and shoulders pattern on the hourly chart, which could trigger a rally. sale Which could push the price of the asset to $90,000.
However, another experienced cryptocurrency analyst, Rekt Capital, said, He said After briefly touching the $98,000 price level, BTC has already entered the parabolic phase of the rise. BTC is trading at $94,968 at press time, down 1.4% over the past 24 hours.
Featured image from Unsplash, charts from CryptoQuant, Glassnode, X, and Tradingview.com