Analysts believe Bitcoin’s on-chain fundamentals point to a 2017-style bull run
Despite an uneventful month for Bitcoin (BTC)
price, on-chain metrics suggest that Bitcoin may be gearing for an
imminent bull run. Noticeably, the number of Bitcoin held on spot
exchanges has been decreasing since the start of the year, according to
data from on-chain analytics firms, CryptoQuant, and glassnode.
Crypto
analyst, Willy Woo, noted that this change in trend is extremely
bullish for Bitcoin as it signals an increased demand for the asset and
interest in holding it as a store of value. Woo tweeted:
“When
coins on spot exchanges drop, it's a sign that new buyers are coming in
to scoop coins off the markets and moving them into cold storage HODL,
we are seeing new HODLers right now. Very macro bullish.”
While
a decreasing number of coins held by spot exchanges can also point to
an exodus into derivatives exchanges, flows from the former to the
latter have also been decreasing according to data from CryptoQuant.
The flow from derivatives exchanges to spot exchanges and hard wallets could possibly be exacerbated by the recent CFTC and DOJ legal action taken against BitMEX exchange.
The current accumulation resembles 2017
The
trend in coins held by spot exchanges started to change in the
beginning of 2020 and it paints a familiar picture for traders. The dip
resembles the accumulation stage of late 2016 which in turn fueled the
2017 bull market that saw Bitcoin price reach its all-time high of
$20,089.
Both stages have followed noteworthy events like the prospect of a Bitcoin ETF led by the Winklevoss twins in 2017 and the recent buying frenzy
by business intelligence giant MicroStrategy. According to Woo, the
market has failed to react to these on-chain indicators. He tweeted:
“This
is one of the few times in my Bitcoin career where the fundamentals
(on-chain data and metrics from infrastructure players) are in moon
mode, yet the market is not woke to it. They will be by 2021. This is an
opportunity I've not seen since mid-2016.”
The DeFi slump makes way for Bitcoin
A
depleting reserve of BTC on exchanges is a bullish sign for Bitcoin
from a macro perspective. However, some suggest the changing trend may
be caused by the growing popularity of DeFi and other liquidity related
protocols that have created a demand for tokenized Bitcoin and the
liquidity that comes with the asset.
This would still paint a
positive picture for Bitcoin as it shows users prefer to receive
interest for holding BTC than to take profit. While there is nearly $1 billion worth of Bitcoin
on the Ethereum blockchain through WBTC alone, the tokenized version of
Bitcoin only started gaining traction in late June 2020.
Moreover, it also seems like the growth of DeFi has been stunted. Token prices have been plummeting and the total value locked in DeFi protocols continues to drop across the sector and also in the tokenized versions of Bitcoin.
The current reduction in interested DeFi participants
has led many analysts to infer that a possible cycling of DeFi and
altcoin profits to Bitcoin is underway. If so, this suggests that
Bitcoin is preparing for another bull run, especially as new participants continue to join the network.
source link : https://cointelegraph.com/news/bitcoin-price-fundamentals-in-moon-mode-as-btc-held-on-exchanges-drops
