The analytics firm Santiment has explained that the current Bitcoin rally could still have some legs left, based on this on-chain trend.
Bitcoin and Ethereum are leaving exchanges, while Tether is seeing deposits
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The “Supply on Exchanges” here refers to a measure that tracks the percentage of the total circulating supply of a given coin that is currently held by the centralized exchanges.
When the value of this measure increases, it means that the investors are currently depositing their coins on these platforms. On the other hand, a decline implies that there are currently net withdrawals taking place on the exchanges.
What these trends suggest for the given asset and the industry as a whole depends on the type of cryptocurrency in question. In the case of volatile coins like Bitcoin and Ethereum, net deposits can be a sign that investors are looking to sell these assets, which can obviously have a negative impact on their prices.
Since the altcoins generally only see a rotation of capital through these largest cryptocurrencies, a bearish trend for them could also have a knock-on effect on their prices.
Drawdowns for these volatile coins, on the other hand, could be bullish for the market as they imply that investors may want to hold their tokens for longer periods.
Here is a chart showing the supply trend on Bitcoin and Ethereum exchanges over the past year:
Looks like both of these metrics have registered a decline recently | Source: Santiment on X
As shown in the chart above, Bitcoin and Ethereum offerings on the exchanges have continued their downward trend following the spot ETF approvals for BTC a few weeks ago.
In the same chart, Santiment has also included the data of the indicator for Tether. It appears that while BTC and ETH have seen supply disappear from the exchanges, USDT has seen net deposits.
The industry’s largest stablecoin has seen around 4% of its entire supply shift to these platforms over the past five weeks, pushing the indicator’s value to its highest point in almost ten months.
Investors use stablecoins when they want to escape the volatility associated with assets like BTC and ETH. However, such holders who seek safe haven in these fiat-bound tokens rather than fiat itself usually plan to eventually return to the volatile side of the cryptocurrency sector.
Stablecoin deposits could therefore be a sign that these investors are looking to buy back Bitcoin and others. As such, the sector could see a bullish effect if this dry powder is deployed by the stablecoin holders.
“The increase in purchasing power implies that that the interim 3+ month #bull bike (as of October) could still have some legs, especially with only 79 days until #Bitcoin halving, which is expected to take place on April 18,” the analytics firm notes.
BTC price
Bitcoin has made a remarkable recovery in recent days as the price has now broken back above the $43,300 mark.
The price of the asset appears to have surged over the past few days | Source: BTCUSD on TradingView
Featured image from Shutterstock.com, charts from TradingView.com, Santiment.net
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