The seven-day moving average of the total number of bitcoin held in exchange addresses fell to 2,214,365 on April 14 – the lowest level since last June.
As of Tuesday, the average was down nearly 8 percent from a high of 2,404,786 registered on Jan. 17, 2020.
The decline in exchange balances suggests a shift to longer-term holding strategies, according to #Glassnode.
That's because investors usually withdraw coins from the exchanges to hold in their personal wallets when prices are expected to rise. Conversely, they tend to move their balances to exchanges in preparation to sell when a price drop is expected or during a price crash.
For instance, bitcoin’s price fell by 33 percent in the seven days to March 15. At the time, the seven-day average of coins held on exchanges rose from 2,333,279 on March 11 to 2,350,795 on March 18.
However, the spike was short lived and the downturn in exchange balances resumed from March 19.
The increased levels of holding may be associated with bullish expectations tied to bitcoin’s mining reward halving, scheduled to take effect in just 27 days. The process, aimed at controlling inflation, will reduce rewards per block mined from 12.5 BTC to 6.25 BTC.
Essentially, miners will be adding fewer coins to the ecosystem following the halving. Some analysts think that would create a supply deficit and push up prices. “Once bitcoin has its halving next month, we expect prices to rally, carrying the rest of the market with it,” said Richard Rosenblum, head of trading at GSR.
Meanwhile, some stock-to-flow models indicate the halving could send bitcoin’s price to $100,000, as noted in the cryptocurrency platform Luno’s weekly market report.
Further, the coronavirus-induced global economic recession and resulting unprecedented monetary and fiscal stimulus launched by the Federal Reserve and the U.S. government, respectively, are widely expected to boost bitcoin’s appeal as a safe haven asset and a hedge against inflation.
However, some observers have bee
n skeptical about the bullish narrative surrounding bitcoin’s halving. Meanwhile, the cryptocurrency has so far failed to perform as a safe haven asset and has largely moved in line with the equity markets. If the decline in exchange balances is a guide, though, the investor community looks to have some belief in the bullish halving narrative and the long-term value of the cryptocurrency as an inflation hedge.
From a technical analysis standpoint, the cryptocurrency’s recovery rally from the March low of $3,867 looks to have run out of steam.
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