Last updated on May 18th, 2024 at 12:51 pm
Bitcoin touches $69,000 and immediately retests down to $61,000 amidst the decreased amount of the currency. Is scarcity a key reason?
March 4 set up the market on the thrill rails as Bitcoin (BTC) updated its historical milestone, reaching the price of $68,869.87. The previous all-time high (ATH) was marked on November 10, 2021, when Bitcoin climbed above $68,000 according to CoinMarketCap data.
Among the array of factors supporting Bitcoin’s surge, scarcity stands out. But what is the trick here?
What Is Causing Low Supply
According to AMBCrypto and CryptoQuant, nearly 50,000 Bitcoins (BTC) were withdrawn from centralized exchanges throughout February, causing a sharp dip in the world’s largest cryptocurrency’s “available to buy” supply.
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This caused the drop in Bitcoin’s exchange to reverse during the month, even as its market price spiked by 44% at the same time.
Bitcoin’s Exchange Reserve Rate. Source: CryptoQuant
Whales Entering the Game
Another significant factor driving the scarcity of Bitcoin is the sharp increase in the number of institutional investors, also referred to as whales in the crypto market.
According to Glassnode, the number of unique entities holding at least 1,000 Bitcoins increased by 4% during February, representing 55 more whales entering the market in February.
Number of BTC whales, March 2023 – March 2024. Source: Glassnode
No small part in BTC scarcity is played by exchange-traded funds (ETFs). The BitMex Research analytics revealed that as of March 1, spot funds held 776,464 BTC overall which equals almost 4% of all Bitcoin’s unlocked supply.
Bitcoin spot ETF cumulative flow ($USm). Source: Farside | BitMex Research
The launch of Bitcoin spot ETFs has opened the gates of the crypto market for TradFi investors in the U.S., not to mention their psychological impact. The event led to bullish forecasts and prevailing optimism over the global community, and led to a significant proximity of a mass crypto adoption.
ETFs have also slung the raft of the altcoin market. Seeing that solely Bitcoin gained its positions, the Web3 sector combined the powers before potential recognition within the big tech realm.
The tendency spurred the blockchains’ performance, as indicated by increased TVL rates of Solana, Ethereum, Cardano, and other core chains in 2023. This is reflected in high occurrences of cross-chain and interoperability novelties. Most illustrative instances: Base and OP Stack integration, which took place a year ago, and the latest WhiteBIT integration with Near Protocol. The latter one is unlocking the ability to mine Near’s HOT token and to withdraw USDT and USDC for free, influencing the performance of 4 currencies at once and equally impacting the market.
It was likely that all investors – not only whales – got motivated to rack Bitcoin due to the aforementioned factors.
Where Is Bitcoin Headed Now?
As of reporting time, Bitcoin retested to $67,439, following the abrupt consolidation. The massive bullish candle for March 6 indicates the sellout of BTC, accompanied by opening long positions for it. This is indicated by the Relative Strength Index (RSI) rate, which decreased below 50 in momentum.
BTC/USD 4h chart. Source: WhiteBIT Trading View
The rapid decrease caused vast liquidations as Bitcoin investors lost over $84 million in the past 12 hours. In total, 301,340 traders were liquidated for $1.11 billion over the day.
Total liquidations for March 6, 3:05 PM GMT. Source: Coinglass
The sale may trigger the open supply rate for Bitcoin by refilling the previously proposed scarcity with low intensity.
Why Scarcity Is A Good Thing?
Amid the halving, scarcity remains a crucial metric to watch for Bitcoin. Typically, a drop in exchange supply implies reduced selling pressure and a potential shift towards other activities, i.e. long-term holding.
With more Bitcoins accumulated in the wallets and the upcoming halving event, the scarcity in the market is brought to the surface. As per the supply-demand dynamics, this is a major bullish signal.
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Paul Osadchuk
Paul Osadchuk is a digital journalist specializing in cryptocurrency and Web3 topics. He writes for GNCrypto, Cryptoslate, and Foresight News EN, and maintains analytical blogs on TradingView, Binance Square, and CoinMarketCap. With over five years of experience in marketing and PR for crypto and Web3 companies, he has gained deep industry insight and expertise in crypto trading.