Bitcoin

Bitcoin price fundamentals suggest an imminent bullish run

Analysts believe that Bitcoin’s chain reaction fundamentals point to a similar bullish run as in 2017.

Despite a month of uneventful Bitcoin pricing (BTC), chain metrics suggest that Bitcoin may be preparing for an imminent bull run. Notably, the amount of Bitcoin held in the spot exchanges has decreased since the beginning of the year, according to data from the chain analysis companies CryptoQuant and Glassnode.

Cryptomoney analyst Willy Woo pointed out that this change in trend is extremely positive for Bitcoin, since it indicates a greater demand for the asset and interest in maintaining it as a store of value. Woo tweeted:

“When the currencies in the spot exchanges fall, it’s a sign that new buyers are coming in to take currencies out of the markets and move them into cold storage to make HODLs, we’re seeing new HODLers right now. Something very macro bullish.

Bitcoin reserves from the spot exchanges.

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Although fewer and fewer currencies are in spot exchanges, this may also indicate an exodus towards derivatives exchanges, the flows from the former to the latter have also decreased according to CryptoQuant data.

The flow from derivatives exchanges to spot exchanges and hardware wallets could be exacerbated by the recent legal action by the CFTC and DOJ against the exchange, BitMEX.

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The current accumulation resembles the 2017 sight

The trend in currencies within spot exchanges began to change in early 2020 and paints a familiar picture for traders. The drop in spot exchange reserves resembles the accumulation stage of late 2016, which later fed into the 2017 bull market, which saw the Bitcoin price reach its historical high of USD 20,089.

Bitcoin balance in exchanges.

Both stages occurred after notable events such as the proposed Bitcoin ETF led by the Winklevoss twins in 2017 and the recent shopping frenzy by business intelligence giant MicroStrategy. According to Woo, the market did not react to these chain reaction indicators. The analyst tweeted:

“This is one of the few times in my career with Bitcoin where the fundamentals (chain data and infrastructure actor metrics) are in moon mode, but the market has not realized it. They will be in 2021. This is an opportunity I haven’t seen since mid-2016.

DeFi’s fall clears the way for Bitcoin

Low BTC reserves in exchanges is a bullish signal for Bitcoin from a macro perspective. However, some suggest that the changing trend may be caused by the growing popularity of the DeFi ecosystem and other liquidity related protocols that created a demand for tokenized Bitcoin and the liquidity that comes with the asset.

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This would continue to paint a positive picture for Bitcoin, as it shows that users would rather receive interest in having BTC than withdraw profits. While there’s almost USD 1 billion in Bitcoin in the Ethereum block chain through WBTC alone (Wrapped Bitcoin), the tokenized version of Bitcoin only started to gain popularity at the end of June this year.
WBTC market capitalization.

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