07.07.202118:15 Forex Analysis & Reviews: Bitcoin: Supply shock and fall redemption

Bitcoin is stuck, and on the daily chart, consolidation seems to form a triangle. If this is the case, the main forecast still does not change: BTC/USD will move to one of the borders of the wide sideways at 31,082.82 - 41,980.24.

And while there is nothing new on the chart, let's consider what the statistics say about the possible future of the main cryptocurrency.

On-chain analyst Willy Woo believes that Bitcoin will face a "supply shock" amid an increase in coin withdrawal rates. He notes that the holders who bought the main cryptocurrency for a long time, unlike short-term speculators, begin to expand their accumulation. Thus, an increasing amount of BTC is being squeezed out of circulation.

Woo mentioned the ratio of Bitcoins in long-term purchases to those in short-term purchases, also known as the supply ratio. He noted that the former is actively absorbing selling pressure from the whales.

"It reminds me of a supply shock that was barely noticed by the market in Q4 2020. Experts debated whether BTC was the insurance against inflation in the post-COVID world when data indicated that long-term investors were accumulating BTC at a fast pace. Subsequently, the price fell sharply, very quickly detaching itself from the close correlation with the stock," Woo wrote in his report.

At the same time, Glassnode has increased the prospects for the rapid adoption of Bitcoin. The company pointed out that an average of 32,000 new users appear on the network of the main cryptocurrency every day, which is a new high for 2021.

Bitcoin user growth last peaked in January 2018. It amounted to about 40,000, after which it corrected downward along with prices.

"The structure we are facing now is not the same," Woo explained. "New users are taking advantage of the current opportunity to redeem the fall, they will reach the highest level in 2021."

And on Tuesday, data analytics company CryptoQuant reported that the number of transactions of net outflow of Bitcoins from spot exchanges exceeded 60,000 for the first time in a year. And the total number of Bitcoin deposits to wallets of spot exchanges fell to less than 20,000.

BTC withdrawal rates jumped at a time when regulators tightened control over cryptocurrency trading platforms. For example, the UK Financial Conduct Authority (FCA) has banned Binance, the world's largest cryptocurrency exchange by volume, from conducting regulated activities in the country "without prior written consent."

What does the dynamics described above say? Generally, the increase in Bitcoin withdrawal rates is seen as the intention of traders to hold onto the cryptocurrency instead of exchanging it for other assets, including competing coins and fiat money.

With the total withdrawal of BTC hitting an annual high, Bitcoin is expected to prepare for yet another period of growth in accumulation.

At the same time, the total reserves of coins of the main cryptocurrency on exchanges have remained relatively stable since May, which indicates that the latest surge in withdrawal of funds practically did not affect the total exchange balance as of Wednesday.