Bitcoin has seen continued bullish momentum in recent weeks, resulting in the asset’s consistent new highs. According to recent analysis, this momentum does not appear to be just random, but comes from major movements behind the scenes.
Especially recently facts indicates that Bitcoin reserves have fallen to an all-time low of 2.4 million, indicating a “supply shock” that coincided with a rise in the price of Bitcoin.
This reduction in foreign exchange reserves, coupled with strong demand, has created a bullish environment that could set the stage for further price increases.
A supply shock in the making
A CryptoQuant analyst known as Kripto Baykus, in a post on the QuickTake platform, shared the prospects of Bitcoin’s exchange rate reserve hitting an all-time low. In the post, Baykus highlighted that the year started with Bitcoin reserves of around 3 million on exchanges.
However, a steady decline through 2024 has led to current levels, reflecting a clear shift in investor behavior. Institutional investors in particular have embraced long-term investment strategies and taken their assets off the exchanges, Baykus noted. The analyst added:
This shift is especially evident among institutional investors, who have increasingly embraced the “hodl” approach, demonstrating strong confidence in Bitcoin’s future potential.
Meanwhile, Bitcoin’s price reflected this move, starting the year around $40,000 and accelerating to surpass $100,000 in November, eventually reaching a new peak above $104,000. Baykus wrote:
Bitcoin’s limited supply, combined with shrinking reserves, is seen as a strong bullish signal for the market. Investors are pricing in the effects of the supply shock, and if the trend continues, Bitcoin is likely to break even more records in late 2024 and into 2025.
Bitcoin current demand attitude
In addition to supply-related trends, another CryptoQuant analyst known as Yonsei Dent recently turned to the Coinbase Premium Index to insights in Bitcoin demand in North America.
This metric tracks activity on Coinbase, one of the largest exchanges in the region, and is traditionally used to predict short-term price movements. However, over the past two weeks, the divergence between the Coinbase Premium Index and the price of Bitcoin has raised concerns.
Dent pointed out that even though the price of Bitcoin rose from $94,000 to $106,000 during this period, Coinbase Premium has fallen. This suggests that the recent price surge may not have been driven by US demand, raising questions about the momentum of Bitcoin’s rally in the medium term.
Deuk commented:
If this price increase is not supported by US demand, it could indicate an underlying weakness in medium-term upward momentum. Investors should remain cautious and monitor this development closely.
Featured image created with DALL-E, Chart from TradingView