The supply of bitcoin on exchanges has again started to shrink in recent days.
#Bitcoin supply on exchanges has started falling again – reversing a 4 week trend. pic.twitter.com/1KXjf86Pwg
— Bitcoin Archive (@BTC_Archive) May 20, 2021
Although the supply of bitcoin had been declining steadily since the beginning of the year, it has risen again since mid-April, when the all-time high price of almost $65,000 was reached.
Moreover, the growth has been very, very fast, so much so that in less than a month it has reached new peaks not seen since the beginning of the year.
The reason could be simple: to monetize the gains.
In fact, when the price of BTC reached an all-time high on 14 April, the outflow of bitcoin from exchanges stopped because many of those who had previously bought at lower, or much lower, prices started selling to monetise the gains. The point was that they evidently thought that with the listing of Coinbase the bullrun of the beginning of the year might have come to an end.
They were right, and ever since the price started to fall, an increasing number of investors have made a similar argument.
So they started to deposit their previously purchased and withdrawn BTC back on exchanges, with the aim of selling them while there was still a chance to do so at a profit.
This resulted in the supply of bitcoin on the exchanges increasing by 7% overall in less than a month to over 2.5 million BTC.
At this point, it is perfectly logical to imagine that these very sales have contributed to the selling pressure being so high that the price has fallen further.
The decline in the supply of bitcoin on exchanges
However, the phenomenon has been reversed in recent days.
After the low peak on 19 May, a net outflow of bitcoin from exchanges seems to have started again, probably due to the fact that some of those who bought at low prices believe it is better to store them on proprietary wallets in the hope that they will increase in value over time.
Furthermore, according to a recent hypothesis, a massive transfer of BTC between two different types of investors may have taken place over the last few days, from those who panicked to those who are more confident in Bitcoin’s future. It is therefore logical to expect that the former would have poured large amounts of BTC into exchanges in the past few days, while the latter, once bought, would have withdrawn them for long-term storage.
