As the crypto market holds its breath for the U.S. Securities and Exchange Commission’s (SEC) impending decision on the first spot Bitcoin Exchange-Traded Fund (ETF), a close analysis of Bitcoin’s on-chain data reveals a market in a state of cautious anticipation.
Between Jan. 4 and Jan. 8, 2024, Bitcoin’s price increased from $44,230 to $46,944 after weeks of sideways and choppy movement. This increase, marked by a peak on Jan. 8, indicates an optimistic but pent-up market. Such price behavior could be attributed to speculative positioning in response to the upcoming SEC decision, as the market seems to be leaning towards a positive outcome.
The 30-day change in Bitcoin supply held in exchange wallets shows that most of the market isn’t looking to sell. Starting at 2,571 BTC on Jan. 4, the balance shifted to a negative 15,183 BTC by Jan. 8. This consistent decrease in exchange-held Bitcoin suggests a growing preference among holders to withdraw their assets. This behavior often indicates a preparation for long-term holding, possibly in anticipation of a post-ETF approval surge in Bitcoin’s value.
The total amount of BTC transferred to and from exchange addresses between Jan. 4 and Jan. 8 indicates consolidation. The high volume observed on Jan. 4 (52,116 BTC to exchanges and 51,432 BTC from exchanges) tapered off mid-week, only to spike again on Jan. 8 (53,196 BTC to exchanges and 52,798 BTC from exchanges). Such a pattern is characteristic of investors repositioning their portfolios in anticipation of significant market movements.
The movement of coins by short-term (STH) and long-term holders (LTH) shows where the selling pressure could come from. On Jan. 8, 74.82% of all coins moved to exchanges came from short-term holders, likely capitalizing on the recent price increase to realize gains. This behavior suggests a preparatory stance for expected short-term volatility or a price correction post-ETF decision. In stark contrast, long-term holders in profit made up only 4.73% of the total exchange inflows. This indicates long-term holders’ belief in the cryptocurrency’s resilience irrespective of short-term regulatory outcomes.
The decreasing Bitcoin balances on exchanges and the trading behaviors of short-term and long-term holders reflect a market at a crossroads. While the general sentiment leans towards a bullish outlook, the readiness for potential short-term fluctuations is evident.
If the ETF is approved and Bitcoin’s price increases, the already decreasing supply of Bitcoin on exchanges could lead to a supply squeeze. This scarcity, coupled with heightened demand, has the potential to drive prices even higher.
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