Bitcoin has seen sustained upward momentum in recent weeks which has led to consistent new highs for the asset. According to recent analysis, it appears that this momentum is not just random, but comes amid major movements behind the scenes.
Especially the last one Data This indicates that Bitcoin reserves have fallen to a historic low of 2.4 million, indicating a “supply shock” that coincided with the rise in the price of Bitcoin.
This decline in foreign exchange reserves, coupled with strong demand, has created a bullish environment that could pave the way for further price increases.
The supply shock is in the making
CryptoQuant analyst known as Kripto Baykus shared predictions about Bitcoin exchange reserve reaching a historic low in a post on the QuickTake platform. In the post, Baycos highlighted that the year began with around 3 million Bitcoin reserves on exchanges.
However, a steady decline throughout 2024 led to the current levels, reflecting a clear shift in investor behavior. Institutional investors, in particular, have adopted long-term holding strategies, withdrawing their assets from exchanges, Baikus noted. The analyst added:
This shift is particularly evident among institutional investors, who have increasingly adopted a “hodl” approach, demonstrating strong confidence in Bitcoin’s future potential.
Meanwhile, the price of Bitcoin reversed this movement, starting the year at around $40,000 and accelerating in November to exceed $100,000, eventually reaching a new peak above $104,000. Baycos wrote:
The limited supply of Bitcoin, coupled with shrinking reserves, is seen as a strong bullish signal for the market. Investors are pricing in the effects of a supply shock, and if this trend continues, Bitcoin will likely break more records in late 2024 and into 2025.
Current demand position for Bitcoin
In addition to the supply-related trends, another CryptoQuant analyst known as Yonsei Dent recently turned to Coinbase Premium Index to make a bid. Visions In demand for Bitcoin in North America.
This metric tracks activity on Coinbase, one of the largest exchanges in the region, and has traditionally been used to predict short-term price movements. However, over the past two weeks, the divergence between the Coinbase Premium indicator and the Bitcoin price has raised concerns.
Dent noted that although the price of Bitcoin rose from $94,000 to $106,000 during this period, the price of Coinbase Premium declined. This suggests that the recent price rise may not have been driven by demand in the US, raising questions about the medium-term momentum of Bitcoin’s rally.
Dent noted:
If this price rise is not supported by demand in the US, it could indicate an underlying weakness in the upward momentum in the medium term. Investors should remain cautious and monitor this development closely.
Featured image created with DALL-E, chart from TradingView
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