Decline in Bitcoin Deposits to Digital Currency Platforms Drops to 2016 Rates
In a recent analysis, CryptoQuant analyst Alex Adler Jr. has identified a key factor indicating an upcoming Bitcoin rally: a significant decrease in Bitcoin transfers to exchanges. This trend, according to Adler Jr., might be a precursor to a potential Bitcoin rally.
The daily number of BTC deposits to exchanges in the final weeks of 2024 fell to 30,000, a figure that is three times lower than the 10-year average of 90,000. This decrease in deposits indicates that users prefer to store their BTC in personal wallets rather than preparing to sell.
One of the reasons for this trend could be the current low levels of the inflow-to-reserves ratio, a fact that Adler Jr. notes is typically observed at the end of bear markets. The current situation with the declining deposits and inflow-to-reserves ratio is reminiscent of the end of bear markets, as stated by Adler Jr.
Another potential indicator of a rally is the ratio of total BTC inflows to the overall reserves held by exchanges. According to Adler Jr., a key factor indicating an upcoming Bitcoin rally is the 120-day simple moving average (SMA-120) pivoting upward and crossing the “zero axis,” a dividing line between bearish and bullish markets. This movement signals a potential end to recent downward momentum and historically, such breakouts have marked the start of multi-week rallies.
The current SMA-120 move looks stronger and healthier compared to a previous failed attempt, suggesting stronger buyer support. Improved market sentiment and possible favorable macroeconomic changes, such as shifts in monetary policy, could further support upward momentum for Bitcoin in the near term.
It's worth noting that Adler Jr.'s focus is primarily on this technical indicator (SMA-120) as a sign of recovery potential, rather than specific price targets. However, he does mention that the price of Bitcoin during distressed seller periods is around $17,000.
The price correction warned about by earlier analysts in December might still be in progress. Earlier in December, analysts warned about a possible deeper Bitcoin price correction before reaching a new all-time high. Such a low level of deposits might lead to a Bitcoin shortage in the spot market, a trend previously observed before major Bitcoin rallies.
Adler Jr. believes that the current decline in deposits and the inflow-to-reserves ratio could signal more significant price movements. The peak in this cycle reached 125,000 deposits per day, according to Adler Jr., making the current decline all the more noticeable.
In conclusion, the current trend of decreasing Bitcoin deposits to exchanges, combined with the SMA-120 moving above the zero axis, suggests a potential end to the recent bear market and the start of a new rally. While the specific price targets are yet to be determined, the current situation in the Bitcoin market could be a promising sign for investors.
Crypto exchanges have seen a decrease in Bitcoin deposits, with the daily number falling to 30,000 in the final weeks of 2024, which is three times lower than the 10-year average. This decrease in deposits, accompanied by a lower inflow-to-reserves ratio, is reminiscent of the end of bear markets and could signal more significant price movements for Bitcoin, making it a potential opportunity for investing in technology-driven finance.
