Direct from the desk of Dane Williams.
Yes, a declining number of Bitcoin on exchanges is bullish for Bitcoin.
And guess what?
That’s exactly what the data is telling us is happening right now.
Check out the following chart from our wonderfully geeky friends at Glassnode:
Putting this into context, the number of coins held on exchanges fell by more than 20,000 BTC to 2,449,785 BTC last week.
According to the most recent Blockware Solutions newsletter (which I highly recommend you subscribe to even if just to skim when major flags such as this are raised), this rate of exchange outflows has only ever occurred 3 times before:
- Following March 2020
- December 2020
- September 2021
I’ll let you do your own scrolling back through the chart, but this decline is certainly enough for traders and analysts alike to take notice.
The significance of Bitcoin leaving exchanges
Why is Bitcoin being withdrawn off exchanges and into user-controlled wallets significant?
Well, a decline in Bitcoin available on exchanges means that there are fewer coins in hot wallets that are readily available to be sold.
The data is telling us that traders are happy to HODL their tokens and the most secure way to do that is by taking them off an exchange and into an address that they own the associated keys to.
I’m sure you’ve heard the saying not your keys, not your crypto!
Well this is that saying being put into action by the masses.
A declining number of Bitcoin on exchanges is an exciting leading indicator if you’re bullish on not only Bitcoin itself, but the entire crypto market that tends to follow the leader.
With less coins available for sale in exchange wallets, let alone actually listed for sale on order books, the supply/demand imbalance offers Bitcoin the potential for a rip higher.
When you're left with only demand, price can only go one way!
Ultimately, opinions are why we have a market
I do find it super interesting to watch the battle between the data and the macro narrative that we're spun.
I’m not sure if you heard (lol), but Russia has invaded Ukraine and war is not only less than ideal for the innocent civilians caught in the middle, but also for market bulls.
The economics textbooks tell us that markets hate uncertainty and what’s more uncertain than a psychopathic dictator with his finger on the nuke button?
Not much…
So for now, the textbooks have it right.
Those trading the narrative are on the right side of the market.
Year to date, Bitcoin has continued its slow grind down into April, extending its year to date fall to 15%.
But markets are not traded via academic textbooks and back here in real life are we about to see the bearish macro factors overtaken by what the blockchain metrics are telling us?
No doubt there's a big wave incoming, whether it's spurred on by war, the US tax season or a humble supply/demand imbalance on centralised exchanges, it doesn't matter.
All you've gotta do now is pick a side.
Which side of the market are you on?
Best of probabilities to you.