Bitcoin Exchange Reserves Hit Record Low, Could $120K Be on the Horizon?
Bitcoin has continued its bullish momentum in recent weeks, leading to the asset continuing to hit new highs. According to recent analysis, this momentum appears to be more than random; Big moves behind the scenes.
especially recently data It shows that Bitcoin reserves have fallen to an all-time low of 2.4 million, heralding a “supply shock” that coincides with the surge in Bitcoin prices.
Decrease in foreign exchange reserves, plus Strong demandcreating a bullish environment that could set the stage for further price gains.
Supply shock is developing
CryptoQuant analyst Kripto Baykus shares the prospect of Bitcoin’s foreign exchange reserve impact historically low In a post on the QuickTake platform. Baykus emphasized in the post that at the beginning of this year, the exchange’s Bitcoin reserves were approximately 3 million.
However, a steady decline in 2024 has led to current levels, reflecting a clear shift in investor behavior. Baykus noted that institutional investors in particular have adopted long-term holding strategies, taking assets off exchanges. The analyst added:
This shift is particularly evident among institutional investors, who are increasingly embracing the “hodl” approach, signaling their confidence in Bitcoin’s future potential.
Meanwhile, the price of Bitcoin has mirrored this trend, starting the year around $40,000 and accelerating past $100,000 in November, eventually reaching Breaking new highs above $104,000. Backus wrote:
The limited supply of Bitcoin, coupled with dwindling reserves, is seen as a strong bullish signal for the market. Investors are pricing in the impact of the supply shock, and if this trend continues, Bitcoin could break further records in late 2024 and 2025.
Bitcoin’s current demand situation
In addition to supply-related trends, another CryptoQuant analyst named Yonsei Dent recently turned to the Coinbase Premium Index to provide opinion Demand for Bitcoin in North America.
The indicator tracks activity on Coinbase, one of the region’s largest exchanges, and has traditionally been used to predict short-term Price changes. However, the divergence between the Coinbase Premium Index and Bitcoin prices over the past two weeks has sparked concerns.
Dent noted that while the price of Bitcoin rose from $94,000 to $106,000 during this period, the Coinbase premium declined. This suggests that the recent price surge may not be driven by demand in the United States, raising questions about the medium-term momentum of Bitcoin’s rise.
Dent noted:
If this price surge is not supported by U.S. demand, it could indicate underlying weakness in the medium-term upward momentum. Investors should remain cautious and monitor developments closely.
Featured image created using DALL-E, chart from TradingView
