Starting from October 14th, a long period of reduction in the number of Bitcoins held on exchanges has begun, which has significantly contributed to the price increase.
That day the price was about $27,000, perfectly in line with the level around which it had been trading sideways for seven months.
Summary
The reduction of Bitcoin (BTC) on exchanges and its impact on the price
On October 14th, there was a peak in the reduction of the number of BTC on exchanges: -20,400 in just one day. It had been since July 1st that nothing similar had occurred.
However, in July that peak was not followed by other peaks, while on November 9th a second, even larger peak occurred with a net withdrawal of 26,400 BTC from exchanges in a single day.
The price of Bitcoin started to rise on October 16th, and by the 25th of the month it had reached $34,500.
On November 9th, it had risen to $36,700, but the following day there was a peak increase in BTC on exchanges: +27,000. This peak effectively nullified the previous day’s negative peak. In fact, the price dropped to $35,500 in the following days.
Starting from November 15th, however, there have been almost consecutive twenty days of reduction in BTC on exchanges. These were not real peaks, so much so that the most significant daily reduction in recent weeks occurred on December 5th with -11,000 BTC.
It is not a coincidence that in those days the price rose above $44,000.
The impact on the price of Bitcoin from the contraction of supply on exchanges
When BTC deposited on exchanges is reduced, the supply of BTC on the markets is also reduced. In fact, only the BTC that has been previously deposited and not yet withdrawn can be sold on exchanges, so an increase in withdrawals decreases the number of sellable BTC.
However, it is necessary to specify that one must take into consideration the net variations, and not just the number of BTC leaving the exchanges. In fact, both outgoing and incoming flows occur every day, and what matters is the difference between the two.
The net changes in the total number of BTC present on exchanges is the parameter that truly reflects how the supply on the crypto markets is increasing or decreasing, and is therefore a much more significant data of interest compared to gross outflows alone.
If the supply of BTC in the crypto markets decreases, as long as the demand for buying remains stable, the price will rise.
The increase in demand
Looking at other indicators, such as trading volumes, it is clear that there has been no increase in demand in recent months.
For example, before October 14th, daily trading volumes were approximately 30 billion dollars, and in July they were 100 billion.
On October 16, the day of the first ascent, they were 113 billion, significantly more than the previous days but in line with those in July. In July, for example, the price was moving sideways around $30,000.
For example, on June 21st they were about 195 billion dollars, while in recent months they have never exceeded 120.
In other words, starting from October 16th, they have increased compared to the previous two months, but without returning to the levels of June and July.
There has therefore been an increase in demand for Bitcoin since the reduction of BTC on exchanges began, but it has not been particularly significant.
On the contrary, the days when the price exceeded $40,000, the volumes were around $80 billion, a value significantly lower than those in July.
Question and offer
This means that the increase in demand for Bitcoin on exchanges has only partially contributed to the increase in value.
On the contrary, it is possible that most of the reduction in supply has been done, especially recently. This is explained by the fact that many of those who are currently making a profit are not very inclined to sell because monetizing now would mean not making as much profit.
This necessarily implies that many believe that a further increase in value is possible, which could make it more convenient to sell in the future rather than now.
For this reason, the offer on exchanges does not increase despite the increase in value making it more convenient to sell, in theory.
Today’s decline
However, tonight for a brief moment the price of Bitcoin went back below $41,000.
Yesterday it had already dropped close to $43,000, but tonight shortly after the reopening of the Chinese stock exchanges, it suddenly dropped from $43,300 to $40,300 in about twenty minutes.
Shortly after, it bounced back above $42,000, and at the moment it is losing 3.7% compared to yesterday.
Note that the Hong Kong stock market opened sharply lower today (-2.2% in the first two hours), but then recovered a bit. At the moment, however, it is still down 0.9% compared to Friday’s closing.
China is experiencing some economic and financial problems, and the Hong Kong stock market is suffering a lot.
Just think that not only is it at the annual lows of 2023, but also that it has been losing 18% since the beginning of the year. However, it has not yet returned to the lows of last year’s bear market, so compared to November 2022, it is still 10% above.
As for Bitcoin, it could also be the American markets that move its price, especially tomorrow, when inflation data will be released, and the day after tomorrow, when the Fed will update its monetary policy on interest rates.
