Bitcoin Exchange Reserves Hit Record Low, Could $120K Be on the Horizon?

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As a seasoned analyst with over two decades of experience in the financial markets, I find myself intrigued by the recent developments in the Bitcoin landscape. The continuous bullish momentum and new highs are not just capturing my attention but also sparking my curiosity about the underlying factors driving this trend.

In the past few weeks, Bitcoin has been experiencing a persistent upward trend, reaching new record highs. Recent analyses suggest that this surge might not be purely coincidental, given significant developments occurring behind the scenes.

Specifically, the latest figures show that Bitcoin’s storage has fallen to an all-time minimum of 2.4 million units, suggesting a significant reduction in supply that seems to align with a rise in Bitcoin’s value. This decrease in available supply might be causing a “supply shortage” effect.

The decrease in available funds for trading, combined with high market demand, has fostered a situation that appears favorable for additional price rises.

A Supply Shock In The Making

A CryptoQuant analyst known as Kripto Baykus shared the outlook on Bitcoin’s exchange reserve hitting historic low in a post on the QuickTake platform. In the post, Baykus highlighted that the year began with Bitcoin reserves at approximately 3 million on exchanges.

Consequently, there’s been a gradual decrease in values throughout 2024, resulting in the present state. This trend mirrors a definite change in investor attitudes. Notably, institutional investors have adopted long-term investment strategies, withdrawing their assets from exchanges, as Baykus pointed out. The analyst further stated:

It’s quite noticeable that institutional investors are adopting the “hold” strategy more frequently, indicating a robust belief in Bitcoin’s future prospects.

As Bitcoin’s price trend followed suit, it began the year at approximately $40,000 and gained momentum in November, breaking through $100,000 and ultimately reaching a high of over $104,000. This is according to the latest reports by Baykus.

Due to the finite number of Bitcoins in circulation and the dwindling reserves, this situation is often interpreted as a robust indication of a bullish market. Investors are taking into account the impact of this supply disruption, and if this pattern continues, Bitcoin might set new records towards the end of 2024 and well into 2025.

Bitcoin Current Demand Stance

As a cryptocurrency analyst, I’ve recently delved into examining the Coinbase Premium Index to gauge Bitcoin’s demand within North America, alongside tracking supply-related trends.

The measure we’re looking at here monitors activity on the prominent exchange known as Coinbase, and historically, it’s been employed to forecast short-term changes in Bitcoin’s value. Lately, though, a discrepancy between the Coinbase Premium Index and Bitcoin’s price has sparked worries.

During this timeframe, Bitcoin’s price climbed from $94,000 to $106,000; however, the Coinbase Premium decreased. This implies that the recent spike in price might not have been fueled by demand originating from the U.S., creating uncertainty about the long-term trajectory of Bitcoin’s rally, as this could indicate a shift in market dynamics.

Dent noted:

If this price surge has not been supported by U.S.-based demand, it could indicate underlying weakness in medium-term upward momentum. Investors should remain cautious and monitor this development closely.

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2024-12-19 09:40