Bitcoin (BTC) reserves on cryptocurrency exchanges have fallen to a multi-year low, according to data from CryptoQuant. The decline coincides with an ongoing bull market, which has pushed the price of the digital asset closer to the $100,000 mark. This significant decline could have major implications for asset supply-demand dynamics.
Is Investor Confidence Growing in Bitcoin?
During a bull market, Bitcoin reserves on exchanges increase as long-term holders (LTH) and short-term holders (STH) transfer their holdings to trading platforms to take advantage. However, the current bull market is breaking this trend, as BTC exchange reserves decrease.
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data CryptoQuant indicates that more than 171,000 BTC have been withdrawn from crypto exchanges since pro-crypto Republican candidate Donald Trump won the November US presidential election. The high volume of BTC being withdrawn from exchanges suggests that holders are likely moving their holdings into cold wallets, indicating long-term confidence in BTC.
According to the chart below, BTC exchange reserves saw a sharp decline in November 2022 – from 3.33 million BTC on November 5 to 2.93 million BTC on December 21.
Another significant decline begins in February 2024, possibly Bitcoin halving In April and the impending supply shortage of digitally-programmed property. During this period, reserves fell from 3.05 million BTC to 2.63 million BTC as of October 30 – a drop of 13.77% in eight months.
Exchange reserves stand at just 2.46 million BTC, the lowest level in years. This continued decline points to a possible supply shortage for Bitcoin, which could drive up its price in the coming months.
BTC Liquid Supply continues to grow
Another data point that supports the long term bullish assumption for BTC of glassnode Liquid supply metric. The chart shared below shows that the digital asset’s liquid supply has increased by 185,000 BTC over the past 30 days.
Specifically, the liquid supply is now around 14.8 million BTC, which represents nearly three-quarters of the current circulating supply of 19.8 million BTC. If this trend continues, there could be a significant increase in the price of Bitcoin due to the lack of supply. However, it can also introduce high volatility.
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While declining exchange reserves and increasing liquid supply are long-term bullish indicators for Bitcoin, a brief correction can be seen in short-term price movements. according to For crypto analyst Ali Martinez, BTC has formed a head-and-shoulders pattern on the hourly chart, which sell-off That could push the value of the property up to $90,000.
That said, another experienced crypto analyst, Rect Capital, said That after briefly touching the $98,000 price level, BTC has already entered the parabolic phase of the rally. BTC is trading at $94,968 at press time, down 1.4% in the last 24 hours.
Featured images from Unsplash, charts from CryptoQuant, Glassnode, X and Tradingview.com
