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Highlights
- Bitcoin supply has plummeted nearly 40% in four years.
- The approval of spot Bitcoin ETF remains a huge catalyst for recent flows.
- Miners reposition ahead of the upcoming halving event.
Bitcoin’s (BTC) inflow in the last two quarters has triggered massive bullish sentiment in the market spurring increased activity around the leading cryptocurrency.
New on-chain data from cryptocurrency analytics firm CryptoQuant shows Bitcoin supply on exchanges plummeting in the last four years. Since 2020, the amount of BTC held by users has plunged almost 40% marking heightened bullish momentum.
Historically, the movement of assets off exchanges points to a general bullish sentiment in the market while an inflow to exchanges shows a prevailing bearish sentiment.
This is because assets on exchanges are deemed likely to be sold unlike those held on other custodians and miner reserves.
“More Bitcoin is being bought and HODL’d than is being mined, and this has been the prevailing trend since 2020. As we know with commodities, scarcity boosts perceived value. The new trend suggests that we won’t see a pronounced rise in supply towards the end of the cycle.”
Bitcoin supply on exchange is now at a five-year low with several analysts suggesting a supply shock. According to recent Glassnode data, exchange supply stands at 2.3 million while more tokens about 3 million assets remain unmoved in a decade.
Spot Bitcoin ETFs Trigger Bullish Drive
The major cause of the market upswing remains the approval of spot Bitcoin ETFs by the United States Securities and Exchange Commission (SEC) on Jan 10. The approval created a new investment window for traditional finance players to increase their exposure to Bitcoin.
At press time inflows to crypto investment products have amassed over $13 billion this year with Assets Under Management (AUM) surging past $96.6 billion. Specifically, Bitcoin products have seen $12.8 billion year-to-date (YTD) with an AUM of $76 billion.
According to CoinShares, Bitcoin investment funds saw weekly inflows of $2.8 billion signaling the continued bullish trend despite minor sell-offs recorded in recent days.
Analyst Point to Halving
Cryptocurrency analysts at CryptoQuant suggest that the upcoming Bitcoin halving is another determinant of the bullish outlook. The halving which is generally seen as a bullish event is set to take place in days with miners positioning for a new reward price for the next four years.
In January, miners moved over $1 billion in Bitcoin to exchanges as commentators pointed to the need to take profits after previous lows. Others suggested that the movement to exchanges might be a hedge by miners to improve capacity and not an outright sale ahead of the halving event.
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