Bitcoin [BTC] bulls encountered another obstacle following a brief surge over the weekend that pushed BTC above $60K. Following three consecutive downward candles, BTC has retraced to $58K.
Opinions among analysts vary on whether $60K acts as support or resistance. However, a recent report by CryptoQuant has highlighted a significant development – Bitcoin exchange deposits hitting a six-year low at 132,100. This suggests a decrease in selling pressure on BTC.
Could this development potentially prevent a drop to $55K?
Reduction in BTC Exchange Activity Indicates Growing Hodler Influence
The data indicates a decline in Bitcoin exchange deposits, usually interpreted as a positive indicator. Economically, a decrease in supply can lead to an increase in the value of each BTC token.
Furthermore, fewer BTC on exchanges implies increased faith in a price rebound among investors.
Additionally, CryptoCrypto’s analysis reveals that spikes in BTC exchange deposits typically coincide with the cryptocurrency testing higher price levels. This hints at profit-taking strategies and often leads to sharp declines, potentially prompting accumulation.
On the contrary, decreased deposits signify a rise in control by long-term hodlers, a trend observed over the past six years since the last peak.
In simple terms, the Bitcoin community is currently dominated by hodlers who are confident in a price adjustment.
As expected, the number of hodlers has surged to 38 million, marking an exceptional 375% increase from the figure of 8 million recorded six years ago. Remarkably, hodlers holding BTC for over a year now make up 70.77% of total addresses.
Interestingly, this percentage surpasses the observations made during the peak in mid-March when BTC reached its all-time high.
To put it concisely, long-term holders play a significant role in preventing a drop to $55K – but what are the chances?
An Intriguing Scenario
Currently, 58.27% of long-term holders are in a profitable position, down from the peak of 74% on March 13 – representing a 16% decrease. Historically, a decline in profitability after reaching highs could signal a possible bearish market in the coming months.
In essence, while most long-term holders continue to be profitable, the diminishing profit margin might indicate a potential slowdown or bearish trend approaching.
Despite facing increasing losses since the March peak when BTC reached $70K, the sustained support from long-term holders indicates a belief in a potential price correction.
If this trend persists, long-term holders might refrain from selling, as indicated by the reduction in BTC exchange deposits.
In addition, a potential interest rate cut by the Federal Reserve could potentially propel BTC towards a new all-time high, provided that BTC deposits on exchanges continue their downward trajectory – is this scenario likely to unfold?
Only Time Holds the Answers
During the 30-day observation period, long-term holders made a noticeable move by selling a considerable portion of their holdings for the first time on September 16th, aligning with BTC’s retracement to $58K.
As mentioned earlier, for a recovery, long-term holders need to reinforce their positions by refraining from further sales. Although this decrease was a rare occurrence, it still aligns with earlier projections by CryptoCrypto.
If long-term holders can demonstrate this event to be an outlier, and Bitcoin exchange deposits remain minimal, the possibility of reaching a new all-time high remains promising.
Conversely, if long-term holders persist in selling, the support at $55K might be endangered, introducing more uncertainty into the future trajectory.