Throughout the recent week, Bitcoin’s movement has largely maintained a sideways trajectory. Presently, the trading value of Bitcoin stands at $07.052, following a marginal increase of 0.22%.
Notably, Bitcoin has demonstrated notable growth on both weekly and monthly charts, showing an uptrend of 2.81% and 2.89% respectively.
The recent surge in Bitcoin’s price prompts an exploration of the underlying driving forces. Notably, Cryptoquant analyst Dan highlights heightened institutional interest and prolonged accumulation as key contributing factors, alongside a noted decrease in the Leverage Ratio.
Decline in Bitcoin’s Leverage Ratio
Reports from CryptoQuant indicate a steady decline in Bitcoin’s Leverage Ratio since November 21st. A diminishing Leverage Ratio signifies a reduction in Open Interest (OI) concerning the available BTC on centralized exchanges.
Historically, a diminished Leverage Ratio tends to mitigate the risk of sudden liquidation scenarios, thus fostering a more organic price movement rather than one influenced by derivatives.
Moreover, the OI to market cap ratio has shown a decline relative to prices, indicating that the price upswings are primarily driven by actual demand rather than speculative trading.
A similar trend is discernible in the sell ratio, signaling closure of long positions as the market gradually cools down.
Noteworthy is the sustained decline in reserves on Centralized Exchanges (CEX). Concurrently, Bitcoin has been flowing towards platforms like Coinbase Prime and Bitcoin ETFs. A decrease in CEX reserves points to a limited supply of BTC available for sale. The influx into Coinbase alludes to significant players, especially institutions, accumulating Bitcoin.
Collectively, these market dynamics paint a picture of a robust Bitcoin market at present. Price movements are not primarily influenced by leverage, setting the stage for sustainable future price hikes.
Implications for BTC
The surge in spot demand, coupled with reduced leverage and active institutional accumulation, underscores a prevailing bullish sentiment within the markets.
For instance, Bitcoin’s Coinbase premium index has consistently maintained a positive standing throughout the week, hinting at optimistic sentiments among U.S.-based investors and an uptick in institutional interest.
In the past day, Bitcoin’s Fund Market Premium has turned positive, indicating bullish investor sentiments with long positions paying shorts to maintain their positions.
This shift suggests a general expectation of price appreciation in the near future.
Furthermore, market participants are increasingly accumulating assets, with outflows surpassing inflows. The exchange netflow now stands at -2.9k, reflecting a trend towards more withdrawals as investors shift towards accumulation.
In essence, Bitcoin is observing a strengthening bullish trend driven by both retail and institutional accumulation. Such market dynamics suggest a cooling-off phase, poised to propel Bitcoin towards further advancements.
If this trend persists, Bitcoin is expected to reclaim the $98,127 threshold in the short term, potentially gearing up for a breakout towards $100k. Following which, a correction might see Bitcoin retrace to $95,800.