Over the past week, the total supply of Bitcoin (BTC) held on centralized cryptocurrency exchanges dropped to a six-year low, according to CryptoQuant data. This downward trend marks 45 consecutive months of net outflows from exchanges. The decreasing supply of Bitcoin on exchanges is being viewed as a bullish sign by the crypto community. Long-term holders are seen buying BTC from exchanges and withdrawing to custody their own funds for the long term. On the other hand, investors with shorter time horizons deposit their funds to exchanges for active trading or selling.
The consistent decrease in BTC held by exchanges since 2017 has had a significant impact on the cryptocurrency’s fluctuations, availability, and overall market behavior. This decline also reflects in BTC deposit transactions to exchanges, which have reached the lowest levels in years. In fact, deposits to exchanges are now at a similar level to July 2020, indicating a reduced pressure to sell.
Bitcoin’s diminishing supply on exchanges coincides with its recent surge in price, surpassing the $40,000 mark for the first time since May 2022, after a temporary fall in the wake of the Terra ecosystem’s collapse. Currently trading at $41,100, Bitcoin faced resistance at the $45,000 level earlier this month.
One of the driving factors behind Bitcoin’s price rally is the growing anticipation of a spot Bitcoin exchange-traded fund (ETF) approval in the United States. If approved, this type of investment vehicle could attract investors who have been hesitant to enter the crypto market, as it would offer an easier way to invest in Bitcoin without the need to manage private keys.
Various analysts have been making positive predictions about Bitcoin’s price. On-chain analyst Willy Woo, well-known for his insights, recently shared his projection of a potential retest of the $39,900 zone before the bullish trend continues. Additionally, multinational banking and financial services firm Standard Chartered has suggested that BTC could surge to $120,000 by the end of next year, following their prediction of a rise to $50,000 in 2022.
The news of Bitcoin’s declining supply on exchanges and the growing market expectations have far-reaching implications for investors and the overall crypto market. With fewer Bitcoins available on exchanges and reduced selling pressure, there is a possibility of increased scarcity, which historically has been a positive signal for the asset’s price. As Bitcoin continues to captivate a global audience, investors and enthusiasts are closely monitoring these developments, looking for opportunities in this dynamic and exciting market.
