The active supply of Bitcoin has played an important role in price since the beginning of the current market cycle. In light of the price approaching $ 52,000, the active supply between 7Y and 10Y recently reached a one-month low of 1.42M Bitcoin. This is in sharp contrast to what happened before the price hits a new ATH on February 18, 2021.
What does the Bitcoin asset supply tell us?
The same supply that was active a month ago is now deactivated? HODLers may be holding their Bitcoins at the current stage of the market cycle, after reserving unrealized profits and losses in the previous ATH.
Bitcoins that are currently leaving the exchanges are going to private wallets and cold storage, so this could be expected to bring back supply shortages. This is likely since the supply shortage narrative has fueled Bitcoin’s price rally since October 2020.
Following the supply shortage narrative, Bitcoin reserves on spot exchanges are almost the same as at the end of January 2021, and this is seen as a sign of an extended price rally. After sticking to the range for a long time, when the price broke out of the $ 46,000 range and reached a new ATH, stablecoin reserves on spot exchanges also increased.
When we compare the current bull run with the previous one, this time it is gaining momentum as the number of addresses between 1000 and 10,000 BTC is decreasing. Wallets below 10,000 BTC are buying more and increasing retail demand on spot exchanges. While wallets continue to buy Bitcoin, stablecoin entry to exchanges has increased significantly in the last two weeks. For example, the USDC foreign exchange inflow volume (7-day moving average) reached ATH with 7.3 million.
Although Stabilcoin entries pointed to changes in Bitcoin price trends in both directions in the past, these stablecoin entries stand out as they follow the price of Bitcoin reaching a new ATH. While Bitcoin hits another ATH of over $ 52,000, these entries clearly point to an extended Bitcoin rally. With the decline in active supply, Bitcoin’s scarcity narrative will send price into discovery mode beyond the new ATH. With an increase of 7.67 percent in a single day, Bitcoin is probably already on this road.