Bitcoin daily deposits to crypto exchanges has reached an eight-year low, causing investors and enthusiasts to wonder what is happening.
According to crypto on-chain analytics firm CryptoQuant on 30 December, the drop in daily deposits on exchanges suggests a large-scale holding of Bitcoin in personal wallets.
The firm also said the Netflow-to-Reserve Ratio confirms a continuous outflow of Bitcoin from exchanges, a trend that is usually bullish for the asset.
Sign of bullish sentiment
A drop in deposits or volume of a crypto asset on exchanges generally suggests that more people are holding Bitcoin in their personal wallets.
This is usually the case when investors are bullish about the future of the asset particularly in the short-term.
CryptoQuant used the Bitcoin Exchange Depositing Addresses Count as an index to measure how much Bitcoin was getting deposited on exchanges.
The firm found out that the 30-day Moving Average (MA) of the number of addresses has dropped to 44,000, which was the case when Bitcoin was only worth $2,000 in 2016.
To put that in perspective, it was from this low number of deposit addresses that Bitcoin began a steep upward climb to reach $40,000 price in 2018.
Another metric the firm used was the Netflow-to-Reserve Ratio, which shows the ratio of Bitcoin coming to exchanges against those leaving.
A negative Netflow-to-Reserve Ratio indicates that there are more Bitcoin leaving exchanges than are being deposited, and it’s currently at one of the lowest levels in history at -0.0025.
This, like the Bitcoin Exchange Depositing Addresses Count confirms that investors are withdrawing more of their Bitcoin to private wallets in anticipation of gains.
Why investors are bullish
The bullish sentiment of investors leading to holding of Bitcoin in personal wallets may be driven by a few factors.
First, Bitcoin is currently the asset with the highest return on investment by far. Bitcoin ETFs also hold more assets than gold ETFs, which is enough to make investors confident about its potential to go higher.
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