Understanding Recent Trends in Bitcoin’s On-Chain Data
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Bitcoin’s Hot Supply Experiences a Notable Decline
In recent analysis by Glassnode, a prominent on-chain analytics firm, it has been observed that Bitcoin’s Hot Supply has experienced a substantial decrease over the last quarter. The Hot Supply indicator monitors the portion of Bitcoin in circulation that has been moved within the past week, rendering it highly liquid.
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This segment of the Bitcoin supply is crucial for understanding market liquidity as it represents the most actively traded coins. Below, we delve into the trends and changes observed in this metric over the years.
The Decline in Bitcoin’s Hot Supply
According to the shared data, the Hot Supply witnessed a surge during the bull market of the previous year, indicative of heightened trading activity. However, with the market’s bearish turn in recent months, this metric has seen a precipitous drop, declining by more than 50% from 5.9% to just 2.8%. This stark reduction signifies a decrease in liquid Bitcoin available for trading, as noted by Glassnode.
Exchange Inflow as a Complementary Indicator
To further corroborate this trend, an examination of the Exchange Inflow metric, which tracks the volume of Bitcoin being transferred to centralized exchange wallets, offers additional insights. Typically, investors transfer their assets to these platforms with the intention of selling, making this a valuable measure of sell-side activity.
Recent Trends in Bitcoin Exchange Inflow
During the bull rally, Bitcoin Exchange Inflow reached a peak of 58,600 BTC per day, indicating substantial deposits to exchanges. However, as market enthusiasm has waned, this figure has fallen to 26,900 BTC per day. This reduction in inflow suggests not only diminished sell-side activity but also a decrease in overall demand, as explained by the analytics firm.
Impact on Futures Open Interest
Beyond spot market activity, the Futures Open Interest, which quantifies the total open futures positions related to Bitcoin, has also shown a significant decrease since Bitcoin’s price reached its all-time high.
Analysis of Bitcoin Futures Open Interest
Previously standing at $57 billion during the ATH, the Futures Open Interest has now dropped to $37 billion, a decline of 35%. This trend mirrors the contraction in on-chain liquidity and suggests a broader shift towards risk-averse trading behavior, according to Glassnode.
Current Bitcoin Price Movements
Bitcoin recently managed to climb back above $87,000, but it has since experienced another dip, currently trading at $85,000. Despite these fluctuations, the cryptocurrency is making efforts to stage a recovery.
The analysis and data presented are powered by insights from Dall-E, Glassnode.com, and TradingView.com.
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