After a few sluggish attempts last week, bitcoin is still struggling to cross the $47,000 mark to validate the start of the long-awaited rally. Despite a price drop of more than 5% for the week as a whole, some indicators show that a rise could be on the horizon. This is particularly the case with the amount of bitcoins leaving cryptocurrency exchanges. Explanations.
Withdrawals that drive demand around the asset
The past few weeks have been marked by massive bitcoin outflows that have occurred simultaneously on major cryptocurrency exchanges. In effect, Coinbase, Binance, Gemini, Kraken, Bittrex, and Bitstamp saw large bitcoin drawdowns. This is illustrated by a chart from Glassnode, shared by analyst Dennis Porter on April 5. It also demonstrates Binance’s dominance in volume growth for the period from May to July 2021. This is also preceded by Coinbase’s bull market exits which spanned Q4 2020 through Q4 2020. end of the first quarter of 2021.
Historically, large outflows of cryptocurrencies from exchanges like the ones happening now have been followed by a rise in price. This is due to the fact that the supply of these assets available for purchase on these exchanges is decreasing, which stimulates their demand and generally increases their price in the market. It is therefore logical to hope that a bullish reversal for the price of BTC will occur shortly. For this, it would then be necessary that no other significant factor likely to exert strong downward pressure on the price of bitcoin occurs in the coming days.
The behavior of whales closely monitored
One such factor is the behavior of whales (users holding at least 1,000 BTC in their cryptocurrency wallets) in the market. Last week, the latter had already put several analysts on alert, abandoning the network or redistributing their BTC stocks. Some observers had also warned that this movement, if it gained momentum, could have an impact on the price of cryptocurrency and curb its rise.
It is therefore important to keep in mind that the evolution of the balance of BTC held by cryptocurrency exchanges is not enough to predict with certainty the evolution of the price of bitcoin. While awaiting the start of a potential recovery boosted by BTC withdrawals from exchanges, bitcoin continues its downward trend and is trading below $44,000 again.
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Luc Jose Adjinacou
Far from having dampened my enthusiasm, an unsuccessful investment in 2017 on a few cryptos only increased my enthusiasm. I therefore resolved to study and understand the blockchain and its many uses and to relay with my pen information relating to this ecosystem.