Bitcoin (BTC) Could be Facing Supply Crunch
Bitcoin (BTC) stabilized for days above $47,000, sparking speculations on choosing a direction. One of the indicators for upcoming success is the participation of big buyers, or “whales”, ready to absorb BTC and build significant cold wallets. Interest in BTC remains significant despite a shift to valuable NFT collectibles, which are heading for mainstream adoption.
The recent rally where BTC revisited $50,000 created another crossroads for the leading coin. One of the markers shows exchange inflows actually accelerated in the past weeks, suggesting some owners may be preparing to sell.
But other indicators suggest renewed accumulation and possibly a supply crunch. One of the explanations is that the recent dip to $28,000 did not spark re-buying from some of the big-scale owners. Indicators of spot buying also suggest a growing supply crunch on some markets.
The exact statistics of BTC remain unknown, and hinge on the overall sentiment for an upcoming price move.
On-Chain Data Suggest Strong Support
Some of the major buying in the past months remains in the money. This collection of wallets creates significant on-chain support, as presented by Glassnode.
Some of the recent buying remains in the red, but those coins may not be sold at current prices. Interpretations of the Glassnode data also suggest holding behavior has returned in August, another indicator of accumulation.
Sentiment Shifts to Greed
The Bitcoin sentiment moved up in August, ranging from extreme fear to greed. Currently, the BTC fear and greed index is at 73 points, down from a temporary peak above 79 points.
The past weeks showed sentiment could shift for BTC within a short time. Trading at leverage is now lower in comparison to the May peak. This is partially due to shifts in policy on the Binance exchange and other markets trying to de-risk their trades to satisfy regulatory demand.
BTC dominance is now down to 43.1%, as other assets take the top spot. Demand for altcoins creates dramatic pumps, which attract more attention than the relatively stagnant BTC.
Market May De-Leverage Further
One of the big factors for price moves is the pressure to decrease risky leveraged trading. In that scenario, spot buying and holding BTC may be an even more important factor.
While there are still both short and long leveraged positions, new regulations may tame those markets and prevent some of the more dramatic moves. Analysis shows funding remains low for some leveraged positions, with spot BTC buying driving the latest trends.
Are Miners Still Holding BTC
Miners have increased chain security, lifting BTC hashrate to above 125 EH/s. But miners are important for another reason – an indication of the readiness to sell or hold onto their coins.
Miners often use OTC desks to trade, but some of the selling also happens on the open market. For now, miners only cause a small peak in selling on the open market, which is still not turning into a trend.
Miners produce 900 new coins per day, and have significantly slowed down selling in the past months. The trend adds to the indicators of BTC accumulation, including a recent MicroStrategy buying. The latest purchase from the firm expands its stash to above $5B, after adding another 3,907 BTC at around $117M.
MicroStrategy now holds 108,992 BTC, a wallet comparable to some of the largest exchanges. The coins, acquired since BTC was around $25,000, are one of the public accumulation wallets that signal the readiness to hold through turbulence.
Tether Supply Gives Markets a Boost
After dipping below 60B, the supply of Tether (USDT) tokens is expanding again. Since August 25, USDT added another 57M tokens. In the past month alone, 3B new USDT entered the market, adding liquidity for multiple exchanges.
USDT is now present in spot trading, derivatives, as well as the entire DeFi market where it is used to supply liquidity to trading pairs, sit as collateral, or is used as arbitrage between various types of dollar-pegged stablecoins.
BTC Can Still Backtrack to $40K
The overwhelming expectation for BTC is to achieve new all-time highs by the end of 2021, marking the second stage of this year’s bull market. But in the short term, a pullback is not excluded.
So far, BTC has not managed to break the $51,000 range and hold above that price. The sideways movement sparked expectations for risky trading, where both short and long positions are at risk for liquidation.
BTC managed to hold above the 200-day moving average, but a breakdown of the $46,000 level may lead to lower prices and a potential opportunity for more spot buying.
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