Decline in Bitcoin Deposits to Digital Currency Platforms Reaches 2016 Figures
In a recent analysis, CryptoQuant analyst Alex Adler Jr. has linked the decreased number of Bitcoin deposits to exchanges and the inflow-to-reserves ratio to a bullish outlook for a potential Bitcoin rally.
Adler Jr. observes that fewer Bitcoin coins are being sold by short-term holders during corrections, with accumulation outweighing distribution. This strong holding behavior among investors suggests a reluctance to sell, a sign of confidence in the future price appreciation of Bitcoin rather than panic selling.
The decline in Bitcoin deposits to exchanges reflects this reduced selling intention and increased accumulation. Adler Jr. highlights that significant Bitcoin balances are being retained, particularly by long-term holders (LTH), whose holdings have increased from 3.551 million BTC in April (when Bitcoin was around $83,000) to 5.191 million BTC more recently, despite the price rising above $117,000.
The low inflow-to-reserves ratio, which measures new Bitcoin inflows relative to total exchange reserves, supports the hypothesis that selling pressure is subdued. Combined, these factors indicate that Bitcoin is preparing for a measured rally with robust accumulation, reducing the likelihood of sharp sell-offs and strengthening the base for upward price movement.
Adler Jr. also points to technical signals like the upward pivot of the 120-day moving average (SMA-120) crossing the zero axis from bearish to bullish territory, hinting at a strengthening market poised for recovery and continued gains.
However, earlier in December, analysts warned about a possible deeper Bitcoin price correction before reaching a new all-time high. Adler Jr. believes that the current decline in deposits and the inflow-to-reserves ratio suggests the potential for more significant price movements.
The trend of low deposits and potential shortage in the spot market, as observed by Adler Jr., has been seen before major Bitcoin rallies. This number is three times lower than the 10-year average of 90,000. A decrease in Bitcoin transfers to exchanges indicates that users prefer to store their BTC in personal wallets rather than preparing to sell.
In summary, according to Adler Jr., these on-chain trends suggest a healthy market base and support for a potential Bitcoin rally, possibly targeting $121,000 and beyond, contingent on continued accumulation and macroeconomic factors. The current decline in the inflow-to-reserves ratio could be a sign of the end of the bear market, as suggested by Adler Jr.'s analysis. However, it could also indicate a deeper Bitcoin price correction, as previously warned by analysts.
- With the decreased Bitcoin deposits to crypto exchanges and the low inflow-to-reserves ratio, some investors might find the current situation as a promising opportunity for investing in Bitcoin, given the bullish outlook indicated by Adler Jr.
- Adler Jr.'s analysis of the on-chain trends, particularly the low Bitcoin deposits and the relationship between the inflow-to-reserves ratio and potential Bitcoin rallies, emphasizes the importance of technology in finance by providing valuable insights that can help investors make informed decisions in the crypto market.
