Bitcoin has seen a continuous trend in the past few weeks and as a result the asset has seen constant new increases. According to a recent analysis, it seems that this trend is not just as random as it comes big moves behind the scenes.
Especially recently data reveals that Bitcoin reserves have fallen to a historic low of 2.4 million, indicating a “supply shock” coinciding with the rise in Bitcoin price.
This reduction in exchange reserves, together with strong demandhas created a bullish environment that could set the stage for further price increases.
A supply shock in the making
A CryptoQuant analyst called Kripto Baykus shared his view on the hit on the Bitcoin exchange reserve historical low in a post on the QuickTake platform. In the post, Baykus pointed out that the year started with Bitcoin reserves at about 3 million on exchanges.
However, a steady decline through 2024 has led to current levels, indicating a clear shift in investor behavior. Institutional investors, in particular, have adopted long-term ownership strategies, pulling their assets from exchanges, Baykus noted. The analyst added:
This trend is particularly evident among institutional investors, who have increasingly adopted the “hodl” approach, showing strong confidence in Bitcoin's future potential.
Meanwhile, the price of Bitcoin has mirrored this trend, starting the year at around $40,000 and accelerating in November to surpass $100,000, eventually reaching level a new peak above $104,000. Baykus wrote:
The limited supply of Bitcoin, along with dwindling reserves, is seen as a strong bullish signal for the market. Investors are pricing in the effects of a supply shock, and if the trend continues, Bitcoin will likely break more records in late 2024 and into 2025.
Bitcoin current demand situation
In addition to supply-related trends, another CryptoQuant analyst called Yonsei Dent has recently turned to the Coinbase Premium Index to offer. vision in Bitcoin demand in North America.
This metric tracks activity on Coinbase, one of the largest exchanges in the sector, and has traditionally been used to make short-term predictions. price movements. However, over the past two weeks, a discrepancy between the Coinbase Premium Index and the price of Bitcoin has raised concerns.
Dent pointed out that despite the price of Bitcoin rising from $94,000 to $106,000 during this period, the Coinbase Premium has decreased. This suggests that the recent price increase may not have been driven by US-based demand, raising questions about the medium-term trend of the Bitcoin rally.
Dent noted:
If this price increase has not been supported by firm US demand, it could indicate fundamental weakness in the medium-term upward trend. Investors should be cautious and monitor this development closely.
Featured image created by DALL-E, Chart from TradingView
