Bitcoin (BTC) Supply on Exchanges Dropped to the Lowest Level in 4 Years, Effect on Price
Bitcoin (BTC)’s influx over the last two quarters has triggered a major bullish sentiment in the market and resulted in increased activity around the leading cryptocurrency.
New on-chain data from cryptocurrency analysis firm CryptoQuant It shows that the supply of Bitcoin on exchanges has decreased over the last four years. Since 2020, the amount of BTC held by users has fallen by almost 40%, indicating increasing bullish momentum.
Historically, the movement of assets outside exchanges indicates a general upward trend in the market, while entry into exchanges indicates a prevailing downward trend.
This is because assets on exchanges are considered likely to be sold, unlike those held in other custodians and miner reserves.
Bitcoin source The stock market is currently at a five-year low, with many analysts suggesting a supply shock. According to Glassnode’s latest data, the exchange supply stands at 2.3 million, while around 3 million more assets remain dormant over the decade.
Spot Bitcoin ETFs Trigger Upward Move
The main reason for the market rally remains the approval of spot Bitcoin ETFs by the US Securities and Exchange Commission (SEC) on January 10. The approval created a new investment window for traditional financial players to increase their exposure to Bitcoin.
At the time of writing, inflows into crypto investment products have reached over $13 billion this year, with Assets Under Management (AUM) exceeding $96.6 billion. Especially, Bitcoin products Year-to-date AUM of $76 billion has been seen at $12.8 billion (YTD).
According to CoinShares, Bitcoin investment funds have seen weekly inflows of $2.8 billion, indicating that the upward trend continues despite the small sell-off recorded in recent days.
Analysts’ Halving Point
Cryptocurrency analysts at CryptoQuant suggest that the upcoming Bitcoin halving is another determinant of the bullish outlook. The halving, which is often seen as a bullish trend, is expected to occur within a few days as miners position themselves for a new reward price for the next four years.
In January, miners moved over $1 billion worth of Bitcoin to exchanges as commentators pointed to the need to take profits after previous lows. Others have suggested that the move to exchanges may not be a direct sell-off ahead of the halving event, but rather a hedge by miners to increase capacity.
Also read: Spot Ethereum ETF: Grayscale to Include Staking in Ethereum ETF Offering
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