- Bitcoin reserves on exchanges hit a new low since the beginning of 2021, implying that supply shock is brewing.
- Large wallet addresses holding 100 to 10,000 BTC have accumulated $2.9 billion worth of the asset over the past three days.
- For over a year, bitcoin spending by wallets holding the asset has dropped to a multi-year low.
Bitcoin holders are unshaken by the spike in volatility, though retail sentiment has flipped to permanently bearish. Analysts expect the altcoin to revisit the $50,000 level shortly.
Bitcoin rally is imminent as accumulation by holders continues
When Bitcoin hit its historical all-time high of $64,804 nearly five months ago, reserves on exchanges had hit a low. Following the recent drop to $44,000 on September 13, Bitcoin reserves on exchanges have hit a new low since the beginning of 2021.
Historically, a supply shock is followed by an adjustment in the asset’s price.
Dropping exchange reserves are likely to trigger a supply shock, and analysts expect Bitcoin’s price to hit $50,000 in the short term.
Pseudonymous cryptocurrency analyst and trader @TraderCoz expects BTC to hit $50,000 if the price holds above $47,300 despite a pullback.
$BTC— TraderKoz🔺 (@TraderKoz) September 15, 2021
Broke out of our range that we were stuck in for a week or so.
I want to see 47.3k hold if we pull back at all. Ultimately though, I'm looking for a push up to 50k next.
Since the level of available Bitcoin supply across exchanges is close to when the asset rallied to $65,000, prevailing supply shock may push the price closer to breakout.
Interestingly, another critical factor in the Bitcoin price rally is accumulation by whales or large wallet investors (holding between 100 to 10,000 BTC). Ahead of the September 7 flash crash, millionaire addresses dropped their BTC holdings by nearly $3.6 billion.
BTC price plunged by 15% after whale addresses sold over 70,000 coins. Large wallet investors continued accumulating through the dip and have added 60,000 BTC in the past three days. This implies that Bitcoin’s second leg up is closer than expected.
Wallets holding BTC for over a year (old hands) have nearly stopped spending their Bitcoin. No redistribution of BTC from old hands signals firm conviction of holders in a bull run.
At the time of writing, Bitcoin price is back above $48,000, and Net Realized Profit/Loss, an indicator that shows whether investors are selling at a profit or loss, has turned positive again. Bitcoin holders are now selling the asset at a net profit, and buyers across exchanges are absorbing the sold coins.
Yan Allemann and Jan Happel, co-founders of Glassnode, an on-chain market intelligence platform, state that Bitcoin holders stepped in to buy the recent dip when Net Realized Profit/Loss had turned negative.
A few #Bitcoin holders were shaken out over the last week, realising losses on-chain.— Yann & Jan (@Negentropic_) September 15, 2021
Stronger hands stepped in and bought the dip.
As $BTC breaks above $48k, net realised PnL has returned positive, and the market is absorbing those profitable spent coins. pic.twitter.com/ktfWo9mtGF
On the whole, last week’s price crash triggered accumulation from the asset’s long-term holders.
As the hype around “buying the dip” is getting less relevant, retail traders are bearish, and the fear and greed index, an indicator of the market sentiment toward BTC, has turned neutral. These changes are expected to positively impact the asset’s price and push it closer to breakout, fueling a second run to the $65,000 level.