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- Bitcoin accumulation on exchanges soared, but analysts warned that this may not guarantee a bullish trend.
- Traders became bullish on BTC as implied volatility decreased.
Lately Bitcoin [BTC] accumulation on the stock exchanges was on the rise. This phenomenon, while often associated with bullish sentiment, comes with subtleties that traders should keep in mind.
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Proceed with caution
Despite the consistent increase in BTC accumulation on exchanges, veteran analyst Willy Woo sounded a note of caution. He felt that optimism could be misplaced in this context.
According to Woo’s analysis, the simple act of accumulating BTC on exchanges does not guarantee an increase in its price. He cited historical data from 2022, when BTC supplies increased on the exchanges, but no significant price increase followed.
The crucial factor here is that the futures markets, which contributed synthetic BTC to the inventory, played a balancing role. The market only showed a bullish trend when the futures markets changed their stance.
Source: Glassnode
Furthermore, Woo highlighted that investors now have an alternative way to gain exposure to BTC, namely futures ETFs. However, this path does not lead to a supply shock as these ETFs represented paper bets on price movements.
Hedge funds can easily take the opposite side of these bets, resulting in the creation of new synthetic BTC. The potential supply of synthetic BTC through futures ETFs is virtually unlimited, he says
Woo underlines the need for a spot ETF in the market. Approval of a spot ETF was denied for seven years while the futures markets thrived. A spot ETF would provide a more authentic representation of actual BTC holdings.
How are traders doing?
In addition to Woo’s insights, recent data from Glassnode revealed a notable development. The 24-hour trading volume of Perpetual Futures Contracts on Binance hit a two-year low at $1,455,021,171.92.
This decline in trading activity is a significant shift from the trend observed on January 8, 2023, when the previous two-year low was recorded. This suggested that traders were moving away from betting on BTC at the time of writing.
Read the Bitcoin price forecast for 2023-2024
Furthermore, the BTC put-to-call ratio saw a decline, from 0.50 to 0.47 according to data from The Block. A shift in the put-to-call ratio suggested traders were slightly more optimistic about BTC’s future.
Another notable metric is implied volatility (IV). IV measures the expected price fluctuations in the market. The decline in IV may indicate that market participants experience less uncertainty about the price direction of BTC in the future.
Source: Het Blok