Some hope may be on the horizon, at least for the leading digital asset, Bitcoin, even though the market capitalization of cryptocurrencies is still below $1 trillion and most of its assets are still struggling to regain their former glory (BTC).
Charts specifically reveal that the balance of Bitcoin on crypto exchanges is at its lowest level in years, suggesting that more people are withdrawing the currency and “hodling,” as well as pointing to the possibility of a positive run in the future.
Indeed, as of June 26, this sum has dropped to 2,384,477.040 BTC, according to charts from the on-chain and financial metrics analysis platform Glassnode provided by its account glassnode alerts.
2,408,237 Bitcoins are now accessible on exchanges. It will be crucial to observe if the number continues to decrease or increases, similar to the previous instance. There was an increase in exchange supply during the price drop in May, but not this time.
A rise in the quantity of Bitcoin available on exchanges is negative. This is because long-term investors and even short-term traders with large Bitcoin holdings prefer using a hardware wallet for security.
As a result, the exchange market only becomes active when these investors want to sell. A few months ago, a really good example of this occurred. Glassnode’s data shows that roughly 5,149 Bitcoins were placed daily during the May crisis on exchanges.
Because of the enormous increase in supply, this is why the correction was so severe. We can also notice the increase in the number of Bitcoins on exchanges during the March 2020 drop. All of this speaks to the same conclusion: there is an increase in long-term investors, and a bubble is not developing.
The stagnating supply of coins in huge wallets can make up for the fact that the exchange supply doesn’t entirely explain this. Even if they did sell, these whales would buy them back at a lower price.
What this means:
In the past, the shift in the quantity of Bitcoin held on exchanges has been a good indicator of market mood. In actuality, the price of bitcoin has historically moved in the opposite direction from the quantity kept in the wallets of well-known exchanges.
This is because assets on exchanges typically decline when there is a stronger buying demand, which indicates that more players desire to purchase than sell. It also suggests that traders are in hodling mode and may be getting ready for a bullish surge in the future. (1)
Applying this reasoning makes it possible to predict a growth in price as long as exchanges’ Bitcoin balances continue to decline.
It’s also important to note that Finbold reported a significant $2 billion outflow of Bitcoin from exchanges in a week a few days prior, indicating that the trend was beginning to take root.