Bitcoin’s Exchange Supply Drops, but Price Continues to Decline: Will October Bring a Rally?
Bitcoin’s price has failed to reclaim the $28,000 mark in September, despite notable institutional investors making significant purchases. On-chain analysis reveals a concerning trend as Bitcoin holders have been moving their assets from crypto exchanges to long-term storage. However, instead of triggering a price rally, the market data shows a decline in Bitcoin exchange supply.
As of now, only 5.83% of the total Bitcoin in circulation is deposited in crypto exchange-hosted wallets, which is the lowest since August 24. Historically, when exchange supply decreases, Bitcoin’s price tends to rally. But in September, a contrarian market trend has emerged as prices continue to decline.
Interestingly, the recent downtrend started shortly after Grayscale made progress towards the approval of its Spot Bitcoin ETF. This led to notable institutional investors, such as Microstrategy, announcing large Bitcoin purchases. Despite the accumulation by these whale investors, the prevailing bearish sentiment has negatively impacted trading activity.
The daily trading volume of Bitcoin has plummeted from $29.4 billion on August 29 to $12.7 billion as of September 28, representing a 57% decline. This decline in spot trading volumes suggests a drop in investor interest during bearish markets.
Historical data indicates that when trading volumes increase and exchange reserves drop, Bitcoin’s price often rallies. However, with the current decrease in exchange supply, a significant increase in market demand is needed to trigger a price rally.
From an on-chain perspective, if Bitcoin can break through the initial resistance at $28,500, the low market supply could potentially push the price towards $30,000. The Global In/Out of Money Around Price (GIOM) data supports this prediction, showing that if the price surpasses $28,500, there is a potential for a bounce towards $30,000.
Conversely, if the price drops below $25,000, the bears may invalidate the positive prediction. However, addresses that have bought Bitcoin at higher prices could prevent a further downward swing.
In conclusion, while the decline in Bitcoin exchange supply may set the stage for a potential rally, it ultimately depends on an increase in market demand. The current market conditions suggest a need for greater trading volumes and investor interest to reverse the ongoing decline in Bitcoin’s price.
Disclaimer: This article is for informational purposes only and should not be considered financial or investment advice. Market conditions are subject to change, and readers should conduct their own research and consult with professionals before making any financial decisions.
