One piece of data supporting this idea is exchange balances — the amount of bitcoin held on major exchanges like Coinbase, Kraken, Gemini, and Binance. Recently, these balances have been steadily decreasing. While it might seem like fewer coins on exchanges is a bad thing, it’s actually a positive sign for the market.
Here are the main reasons why bitcoin moving off-exchange is a good sign. First, there is less supply for sale: When bitcoin is held on exchanges, it’s typically there to be sold or traded. More bitcoin on exchanges can mean higher selling pressure, which pushes prices down. In addition, when people move bitcoin off exchanges, it suggests they aren’t planning to sell anytime soon. This reduces the risk of large, sudden sell-offs.
Over the last three months, around 200,000 bitcoin have been withdrawn from exchanges. This signals that investors are confident in the long-term value of bitcoin and are holding onto their coins, waiting for a more favorable time to sell.
This trend, combined with broader market dynamics, points to the likelihood of another leg up in the bull market once reaccumulation runs its course.
Another useful metric to watch is HODL Waves. These waves use different colors to represent how long bitcoin has been sitting in wallets without being moved. Each “wave” shows the percentage of bitcoin last moved within a specific time frame, like 1-4 weeks, 3-6 months, or even years ago.
Think of it like a timeline of bitcoin holders — the longer someone holds their bitcoin, the more likely they are to keep holding. By looking at the chart, you can see which groups of holders are buying, selling, or simply holding onto their coins.
Right now, the most noticeable change is in the 1-4 week holders. This group has been shrinking, which suggests some short-term traders are selling. However, the bands representing longer-term holders are either stable or slightly increasing. This means most investors are holding onto their bitcoin, likely anticipating higher prices in the future.
To get a clearer picture, let’s zoom in on the shorter-term bands, like those representing coins held for 1 week to 3 months. While there’s a small decline in these bands, the movement is minimal — only a few percentage points. This indicates that most long-term holders are staying firm, and there’s no significant rush to sell.
Finally, lets look a trading volume. Trading volume has been steadily decreasing the last few weeks. It peaked during the sell-off in late February and has been relatively muted since then. For now it seems like exchanges are being dominated by small traders and market makers. The volume that would be needed for a large flush down is not there and doesn’t seem to be imminent. In a healthy bull market you want to see volume pick up as price increases and then drop during a sell off. For example, look below.
As you can see volume was highest in November when bitcoin appreciated about 40% in the immediate aftermath of the election. Since it hit $105k at the end of January it has been on a downward trend. But volumes are also dropping suggesting that there is exhaustion amongst sellers and the likelihood of a significant drop from here is low. This is still a market that is dominated by buyers over sellers and that supports the idea that prices are consolidating and investors are reaccumulating bitcoin.
For digital assets like bitcoin, the implications are mixed. Historically, rising inflation and uncertainty can lead to short-term selloffs in risk assets as investors flock to cash or defensive investments. We saw this at the end of 2021 and into 2022. However, bitcoin’s preprogrammed scarcity — with only 21 million coins ever to exist — makes it an appealing hedge against long-term inflation and currency debasement.
If the administration’s policies ultimately lead to a structurally weaker dollar, Americans may see their purchasing power decline. Yet in such a scenario, bitcoin could become an even more attractive store of value. As people seek to preserve their wealth, allocating a portion of their portfolio to bitcoin may prove to be a prudent decision. And if the dollar weakens significantly, those who have already built a bitcoin reserve could find themselves well-positioned for the future.
Now might be the time to consider your own strategic bitcoin reserve. If the U.S. government sees the value in holding bitcoin as a strategic asset, perhaps it’s worth thinking about how it fits into your portfolio too.
The appeal of doing this with Bitcoin lies in the strength of its network and the value of the asset itself. Bitcoin is known for its digital scarcity, but it also has the most secure and decentralized blockchain. It’s been running without interruption for over a decade, making it one of the most reliable networks in existence. Trust is crucial in financial systems, and bitcoin’s network offers unparalleled reliability. This can’t be said for some other platforms like Ethereum, Solana, Ripple, or Cardano, which have faced outages and security challenges.
That said, using RBTC isn’t entirely trustless. The conversion from BTC to RBTC is managed by a federation that maintains the peg between the two assets. This introduces a level of third-party trust that doesn’t exist when simply sending bitcoin from one wallet to another.
This emerging sector, often referred to as BTCFi, is still in its early stages — think second inning of a nine-inning game. There’s a relatively small amount of bitcoin in these DeFi platforms right now, and the user experience needs significant improvement. However, as the infrastructure matures, we believe BTCFi could become a major narrative in the next bull cycle.
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