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On-going ‘supply shock’ for Bitcoin as BTC withdrawal rates climbs higher

By
Redakcja
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5 min reading

The supply shock is being ignored which is something that happened quite similarly to Q4 2020 before the price of bitcoin went up says Willy Woo. As Bitcoin (BTC) continues to trade besides the $30,000-$40,000 range with the latest data coming out with a high chance for a bullish breakout.

The supply shock is being ignored which is something that happened quite similarly to Q4 2020 before the price of bitcoin went up says Willy Woo. As Bitcoin (BTC) continues to trade besides the $30,000-$40,000 range with the latest data coming out with a high chance for a bullish breakout. 

According to Willy Woo, an on-chain analyst there is a possibility for a supply shock in the Bitcoin market as long-term traders continued to push BTC supply from short-term ones. Woo believes the entire process to push more Bitcoin out of circulation. The analyst mentioned to the ratio of Bitcoin has strong support also known as Bitcoin supply ratio, also pointing out the fact that the former is actively throwing away their crypto holdings since February. “It reminds me of supply shock that went by unnoticed by the market in Q4 2020,” wrote Woo. ‘Pundits were debating whether BTC was an inflation hedge in a post- COVID world when the data was pointing to long term investors stacking BTC at a fast pace.” 

“The price subsequently went on a tear, very quickly de-coupling from its tight correlation with stocks.” Added Woo. Glassnode is another on-chain data analytics service, which has increased Bitcoin’s growing adoption options. The portal showed that the Bitcoin network has been onboarding an average of 32,000 new users on a daily basis, which is a height of success for 2021. According to sources the Bitcoin Network User growth metric increased last time during January 2018, reaching approximately 40,000 before rectifying lower alongside the prices. It proved that new users stopped reaching out to the Bitcoin network as its price crashed from the $20,000 top in January 2018 to as low as $3,200 in December 2020. 

“This is not the structure we are experiencing right now,” said Woo. “New users are taking this opportunity to buy the dip; they’re coming in at the highest rate seen in 2021. Which is again, another example of on-chain data showing divergence to the price action.” Said Woo. Bitcoin is currently lodged under $34,000 at publishing time, up by 17.52% from its previous bottom level of $28,000 on June 22. On the other hand, petr Kozyakov, co-founder and CEO of crypto-enabled payment network Mercuryo, thinks that Ether (ETH) may steal the thunder from Bitcoin in the coming days as the London hard fork approaches. “The proposed launch of the London Hard Fork upgrade and the ultimate migration to Ethereum 2.0 is helping to renew investors’ confidence,” he added. “Once the hype settles, Bitcoin could move up to $50,000 in the short-to-medium term perspective.”

The data analytics firm CryptoQuant recently reported earlier Tuesday that Bitcoin’s net outflow transaction count from spot exchanges went above the 60,000 mark for the first time in a year. All the while, the total number of Bitcoin deposits to spot exchanges wallets went below 20,000. The BTC withdrawal rate increased during this period and also witnessed regulators increasing their scrutiny over cryptocurrency trading platforms. For example, the United Financial Conduct Authority (FCA) has banned Binance which is the worlds biggest cryptocurrency exchange by volume from working on regulated activity in the country “without the prior written consent.” 

Recently, Barclays pointed out its client that they could no longer transfer funds to Binance, due to the FCA’s order. But there is another way apparently, they could withdraw funds from Binance to their banking accounts. Meanwhile, the people’s bank of China also took action against a local company for reportedly trading cryptocurrency on the side of their regular business activities. Beijing strongly condemned all kinds of cryptocurrency-related activities in May, which resulted in forcing the world’s largest crypto mining community in its regions to completely shut down or to move their operations to abroad. Basically, an accumulation in Bitcoin withdrawal rates is seen as trader’s intention to keep the cryptocurrency instead of trading it for assets which includes rival cryptocurrencies and fiat money. Nevertheless, with the total BTC withdrawals reaching a one-year high, people are expe acting higher as there is Bitcoin looking forward to shift on to the “Hodling” sentiment. But the overall Bitcoin reserves held by exchanges have remained somewhat stable since May. The exchanges in BTC can change vastly due to their geographical dominance. For instance, trading platforms having alliance with China and Chinese traders reported shortages in their Bitcoin balances. They include Binance, who has BTC reserves go low by 7,214.97 units in the last week and Huobi which handled the withdrawals of 4,398.63 BTC during the same time period. Although, United States based Kraken added up to 6,751.98 BTC and this is also considered as the highest among the Non-Chinese exchanges. 

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