On-chain data reveals a trend in the current Bitcoin cycle that differs from previous epochs. According to Glassnode, an on-chain analytics firm, during past cycles, the balance on exchanges registered net increases while this cycle has seen more Bitcoin leave exchanges than ever before.
The “balance on exchanges” refers to the total amount of Bitcoin sitting in centralized exchange wallets. When this metric rises, it means investors are depositing coins onto these platforms; when it declines, withdrawals are occurring in the market.
Glassnode used halvings as starting points for each epoch or cycle. Halving events occur approximately every four years and permanently cut miners’ block rewards by half. These events have far-reaching consequences for cryptocurrency economics since they constrain asset production rates following them.
From Glassnode’s graph above, we can see that during epoch 2 (the second observed cycle), there was a net growth of 1.02 million BTC in the Bitcoin balance on exchanges. The next cycle saw almost double what its predecessor did with a rise of 1.97 million BTC.
Epoch 1 is absent here because it marked the first time ever that bitcoin traded so BTC exchanges were also new entities at that point which meant their supply could only go up since they didn’t exist previously.
However unlike those two cycles where large numbers of inflows occurred into crypto-exchanges ,this one has been different . Investors have taken out around 680k bitcoins from these platforms instead .
As shown below,the decline in bitcoin balances held by Exchanges took place over recent months:
Source: Glassnode on Twitter
Before COVID-19 crash happened back in March last year, the Bitcoin balance on exchanges hit a peak value of 3.2 million BTC.
“Retrospectively, the Covid Crisis appeared to be a catalyst for an inflection in participant interaction with exchanges, marking the inauguration of a macro decline in Exchange Balances,” notes Glassnode.
Today, this indicator’s value stands at 2.3 million BTC which suggests that it has declined by around 28% from its peak value. This cycle is out of line compared to previous cycles but we must remember that this epoch isn’t over yet and anything could happen.
However,it’s unlikely that there will be any reversal now since the next halving event is not far away (2024).
At present ,Bitcoin trades at $26,700 which represents a gain of about 1% within one week .
Source: BTCUSD on TradingView
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