How 39,000 Bitcoin re-entering exchanges impact its bull run

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Bit­coin is con­sol­i­dat­ing at a range above $55,000 since recov­er­ing from the 26 Novem­ber slump. Over the past few days, there hasn’t been any form of struc­tur­al break indica­tive of a bear­ish bias. But an inter­est­ing on-chain devel­op­ment is sug­ges­tive of a pos­si­ble dire situation.

While Bit­coin remained at $56,460, the like­li­hood of a break­out is high, but sur­pris­ing­ly the direc­tion is still uncer­tain. In this arti­cle, we will ana­lyze the fun­da­men­tal change and why it may or may not car­ry bear­ish implications.

Bitcoin Exchange Reserves rise for the first time since September 2020

Source: Cryp­to­Quant

One fun­da­men­tal bull­ish indi­ca­tor relied upon since the begin­ning of the bull run last year is the declin­ing sup­ply of Bit­coin on exchanges. Since March 2020, a trend was begin­ning to set when investors were tak­ing BTC off-exchange and pos­si­bly stor­ing it in their pri­vate wallets.

Less BTC on exchanges meant there was a reduc­tion of sell­ing pres­sure, as an illiq­uid sup­ply of Bit­coin increased. It was a strong bull­ish nar­ra­tive through­out the ral­ly but now, there was a sharp change observed.

Accord­ing to Cryp­to­Quant, the amount of Bit­coin enter­ing the exchange over the past 24-hours reached 39,000 BTC i.e worth close to $2.2 bil­lion. That is a large amount of cap­i­tal mov­ing into exchanges and this is the first mas­sive inflow since Sep­tem­ber 2020.

At first glance, this can be con­sid­ered a strong bear­ish sign. Such a huge inflow into exchanges means a col­lec­tive of indi­vid­u­als might pos­si­bly be look­ing to sell their BTC at the cur­rent range, which is 15% off from the ATH lev­el. How­ev­er, on an ana­lyt­i­cal lev­el, it could also mean anoth­er bull­ish cat­a­lyst. Check it out.

Spots exchanges < Derivatives Exchanges?

Source: Cryp­to­Quant

Now, if the above chart is observed, it is clear that over the past 24-hours, the bit­coin exchange reserves on deriv­a­tives exchange has increased, not spot exchanges. With spot exchange reserves remain­ing sta­ble, sell­ing pres­sure might not be evi­dent from investor’s but lever­age traders might be form­ing up a play.

With deriv­a­tives exchange reserves ris­ing, it can be spec­u­lat­ed that a group of indi­vid­u­als might be look­ing to lever­age in high­er prof­its for an upcom­ing price leg up. Hence, dump­ing BTC on deriv­a­tives exchanges makes sense, in terms of set­ting up new orders.

Over­all, it is not time to pan­ic yet for Bit­coin investors. Price is yet to reflect a mar­ket change and over the next few days, the trend will be clearer.

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