One analyst explained how Bitcoin’s availability for trading has quietly declined during the asset’s recent consolidation phase.
Bitcoin may be in a good position to reach new all-time highs
In a new after on X, analyst Willy Woo discusses the recent trend in Bitcoin inventory residing on centralized exchange platforms.
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The chart below shows how cash and paper BTC reserves have changed in recent years.
As the chart shows, the amount of Bitcoin held in spot wallets has fallen in recent months. The total amount of such BTC held in custody by central entities has now fallen to just 2.3 million.
It is also clear that the total sum of spot and ‘paper’ BTC (highlighted in purple) has fallen at the same time. Paper BTC here refers to derivative products related to cryptocurrency that do not require investors to actually own the assets.
Considering that the combined sum of exchange inventory for the cryptocurrency has fallen, it appears that the drop in spot BTC is not a result of paper BTC replacing it.
Generally, exchange offerings are considered part of the Bitcoin offering, which is “available” for trading. Due to the way supply and demand dynamics work, less of this available supply could be a constructive sign for the cryptocurrency.
The chart shows that this drop in stock market inventory occurred during a period when the cryptocurrency’s price was struggling after hitting a new all-time high (ATH). As Woo notes,
While everyone who bought Bitcoin panicked the price has not risen in the last two months, the available BTC was quietly snapped up, and most importantly, without any paper BTC being printed in its place.
Thus, the fact that available supply has fallen during such a period could be a bullish sign for the coin. “It’s only a matter of time before BTC squeezes past record highs,” the analyst says.
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In another X afterWoo also discussed how capital inflows into Bitcoin have just started to pick up again after previously recording a steep decline.
As the chart shows, network inflows peaked at the same level as ever before, but there was a major slowdown in the consolidation that followed.
Inflows from spot exchange-traded funds (ETFs), highlighted in light green, also disappeared earlier, but have now made a comeback alongside these new capital inflows.
BTC price
Bitcoin had previously recovered to $71,000 but appears to have slipped in recent days as it has now returned below the $68,000 level.
Featured image from Shutterstock.com, wocharts.com, chart from TradingView.com