Bitcoin has seen continuous bullish momentum in recent weeks resulting in the asset’s consistent new highs. According to recent analysis, this momentum appears to not just be random as it comes amid major moves behind the scenes.

Particularly, recent data indicates that Bitcoin reserves have dropped to a historic low of 2.4 million, signaling a “supply shock” that has coincided with a surge in Bitcoin’s price.

This reduction in exchange reserves, coupled with strong demand, has created a bullish environment that could set the stage for further price increases.

A CryptoQuant analyst known as Kripto Baykus shared the outlook on Bitcoin’s exchange reserve hitting historic low in a post on the QuickTake platform. In the post, Baykus highlighted that the year began with Bitcoin reserves at approximately 3 million on exchanges.

However, a steady decline throughout 2024 has led to the current levels, reflecting a clear shift in investor behaviour. Institutional investors, in particular, have embraced long-term holding strategies, pulling their assets off exchanges, Baykus noted. The analyst added:

This shift is particularly evident among institutional investors, who have increasingly embraced the “hodl” approach, demonstrating strong confidence in Bitcoin’s future potential.

Meanwhile, Bitcoin’s price has mirrored this movement, starting the year at around $40,000 and accelerating in November to surpass $100,000, eventually reaching a new peak above $104,000. Baykus wrote:

The limited supply of Bitcoin, combined with shrinking reserves, is seen as a strong bullish signal for the market. Investors are pricing in the effects of the supply shock, and if the trend persists, Bitcoin is likely to break further records in late 2024 and into 2025.

In addition to supply-related trends, another CryptoQuant analyst known as Yonsei Dent has recently turned to the Coinbase Premium Index to offer insights into Bitcoin’s demand in North America.

This metric tracks activity on Coinbase, one of the largest exchanges in the region, and has traditionally been used to predict short-term price movements. However, over the past two weeks, a divergence between the Coinbase Premium Index and Bitcoin’s price has raised concerns.

Dent pointed out that despite Bitcoin’s price rising from $94,000 to $106,000 during this period, the Coinbase Premium has declined. This suggests that the recent price surge may not have been driven by US.-based demand, raising questions about the medium-term momentum of Bitcoin’s rally.

Dent noted:

If this price surge has not been supported by U.S.-based demand, it could indicate underlying weakness in medium-term upward momentum. Investors should remain cautious and monitor this development closely.

Featured image created with DALL-E, Chart from TradingView

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