Bitcoin analyst says ‘supply shock’ underway as BTC withdrawal rate spikes to one-year high
The bitcoin community is lamenting a fresh surge in bitcoin withdrawals by, amid fears that cryptocurrency markets may be heading for a ‘supply shock’ as money is pulled out of the market.
Bitcoin is beginning to look like a bubble, at least in terms of its supply. The cryptocurrency’s average daily trading volume dropped to $24.6 billion on Thursday, a drop of nearly $7 billion from its daily average of $31.8 billion in the last 30 days. Bitcoin’s daily withdrawal limit has also begun to rise, jumping to $6.9 million on Thursday from $5.1 million in the last 30 days.
While bitcoin (BTC) continues to move sideways in the $30,000 to $40,000 range, new indications point to a possible bullish breakout.
Is bitcoin ready for a quiet breakout like in Q4 2020?
Willie Wu, an analyst at the channel, predicts a potential supply shock to the bitcoin market if long-term holders continue to snatch up BTC offers from short-term holders. Wu stated in his newsletter at 2. Juli that the process could take more bitcoins out of circulation.
The analyst referred to the ratio of the number of bitcoins in strong and weak hands – also known as the bitcoin supply ratio – and noted that the former actively absorbed selling pressure from whales that dumped their crypto-currency assets since February.
The availability of BTC on exchange markets is falling relative to supply (blue), resulting in a supply shock (green). Source: Woobull
This reminds me of the supply shock that went unnoticed by the market in the fourth quarter of 2020, Wu writes. Experts debated whether BTC covered inflation in a post-COVID world, when data showed long-term investors were accumulating BTC at a rapid pace.
The price then rose, very quickly breaking free from its close correlation with the stock.
Increase in number of new active users
Glassnode, another blockchain-based data analytics service, has also raised the prospect of rapid bitcoin adoption. The portal revealed that the bitcoin network receives an average of 32,000 new users per day, which is a new record for 2021.
The growth in the number of users of Bitcoin’snetwork reflects the increasing level of adoption. Source: Glassnode
The bitcoin network’s growth rate last peaked in January 2018 with around 40,000 users, before correcting downwards along with prices. It appears that new users stopped coming to the Bitcoin network as the price plummeted from $20,000 at its peak in January 2018 to $3,200 in December 2020.
That’s not the structure we’re dealing with now, Wu said. New users are taking the opportunity to buy dip; they are arriving at the fastest pace since 2021.
Another example of a data ring showing divergence with the price movement.
At the time of publication, bitcoin is currently stuck below $34,000, up 17.52% from its previous low of $28,800 on the 22nd. The month of June is a good match.
For his part, Peter Koziakov, co-founder and CEO of crypto-currency payment network Mercuryo, believes that Ethereum could steal Bitcoin’s popularity in the near future as the London-based hardforward approaches.
He said the planned launch of the London hard fork update and the final transition to Ethereum 2.0 will help restore investor confidence. Once the hype subsides, bitcoin could reach $50,000 in the short to medium term.
Analyst firm CryptoQuant reported Tuesday that the number of net bitcoin exits from spot exchanges exceeded 60,000 for the first time in a year. Meanwhile, the total number of bitcoin deposits on money exchange portfolios has dropped to less than 20,000.
Number of transactions in and out of the bitcoin cash market. Source: CryptoQuant
BTC withdrawal rates have risen at a time when regulators have also stepped up their oversight of cryptocurrency exchange platforms. For example, the UK Financial Conduct Authority (FCA) has banned Binance, the world’s largest cryptocurrency exchange by volume, from conducting regulated operations in the country without prior written approval.
On Monday, Barclays informed its customers that they could no longer transfer funds to Binance, citing a ruling by the FCA. However, the London-based bank said customers can withdraw money from Binance to their bank accounts.
Earlier on Tuesday, the People’s Bank of China also took action against a local company for allegedly trading cryptocurrencies outside the normal course of business. In May, Beijing effectively banned all cryptocurrency-related activities, forcing the largest cryptocurrency mining community in its regions to shut down or move their operations abroad.
In general, the rise in bitcoin withdrawals is seen as an intention by traders to hold onto the cryptocurrency rather than exchange it for other assets, including competing cryptocurrencies and fiat currency. Given that the total volume of BTC withdrawals has reached its annual peak, we can expect bitcoin to experience another surge in the midst of the so-called hodgepodge feeling.
No. Looks like retail is back and #HODLing!
– Johan Kirsten (@JohanKirsten1) July 6, 2021
However, total bitcoin reserves on the exchanges have remained relatively stable since May, indicating that the recent spike in foreclosures has little impact on the overall balance of the exchanges in the seventh quarter. July had.
BalanceBTC on exchanges. Source: Bybt.com.
It should be noted that BTC balances on exchanges can vary significantly depending on their geographical dominance.
For example, trading platforms with ties to China and Chinese traders have reported a drop in their bitcoin balances. These include Binance, whose BTC holdings dropped by 7,214.97 units last week, and Huobi, where 4,398.63 BTC were withdrawn in the same period. BTC balances on the OKEx exchange decreased by only 1,357.53 BTC.
However, US exchange Kraken added 6,751.98 BTC to its vaults, the highest among non-Chinese exchanges in the past seven days, while Coinbase’s reserves rose by 168.88 BTC.
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