With the bitcoin price off nearly 50% from its all-time high, bullish traders are hanging their hopes on a new datanearing a bottom: a significant surge in outflows of the cryptocurrency from exchanges.
While it’s too early to tell if the outflows will be sustained, the data might show that someand have no intention of liquidating their bitcoin (BTC) on the exchanges. In the logic of cryptocurrency markets, the traders might be moving their coins to wallets, custody, or cold storage while awaiting a price rebound.
According toGlass node, Crypto exchanges registered a net outflow of 22,550 BTC on Monday, the most significant single-day net drain since Nov. 2, 2020. The exchanges, including Binance, Coinbase, and Kraken.
“The outflow can best be described as multifaceted, bordering on HODLing, and the use of the digital currency in decentralized finance,” Petr Kozyakov,at the global payment network Mercury, told CoinDesk. To “HODL” is crypto-market slang for buy and hold.
The number of bitcoins held in exchange wallets fell to a three-week low of 2.54 million from 2.56 million.
Investors typically move coins from exchanges to wallets, taking out liquid supply from the market when they intend to buy and hold in anticipation of price rallies.
“Investors appear to be storing their assets inwith anticipation that the current drop in price will balance out for new price runs toward and above its previous all-time high,” Kozyakov added.
Some investors take direct custody ofblockchain to earn extra yield. Tokenization refers to locking up bitcoin on Ethereum and issuing an equivalent number of tokens tied to bitcoin’s price. The passes can then be deposited in (DeFi) lending and borrowing protocols.
“With bitcoin in DeFi, investors get to maximize their, a better option for many who prefer not to keep their assets idle,” Kozyakov said.
DeFi Pulse shows total bitcoin locked in smart contracts has grown from 94,000 in April to about 174,000 now.
Such Tokenization of bitcoin on other networks is also a source for reducing supply in the market. All things considered, the latest outflow of bitcoin from centralized exchange paints a bullish picture. However, Jason Deane, an analyst at Quantum Economics, called for a cautious approach.
“The market is currently lacking direction, sentiment is mixed, and many metrics are reporting, so this traditionally bullish signal should be interpreted with caution and in the context of other indicators,” Deane said.
Bitcoin is currently trading near $33,000, representing a 1% drop on the day. Prices fell by 35% in May onand China’s regulatory crackdown.
While exchange outflows have picked up, demand from “whale” entities – those with sizable holdings whose actions can theoretically move the market – remains muted at best. While the supply held by entities holding 1,000 to 10,000 coins has increased by 35,000 BTC to 4.183 million this month, the tally remains below the May 24 high of 4.186 million.
A sustained rise in supply held by whale entities may be bull run from October 2020 to April 2021.to restore the battered market confidence. The balance held by these large investors rose in tandem with the price throughout the