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The analyst explained that Bitcoin will likely continue its recent bull run, at least in the compact term.
Bitcoin Spot Exchange Supply Has Been Dwindling Lately
In the novel fasting in X, analyst Willy Woo discussed the short-term and medium-term trajectories that BTC could follow. The analyst says that in the case of the former, the uptrend will continue, with “likely 1 week left.”
In the medium term, things seem more complicated, as Woo pointed to a trend emerging in Bitcoin holdings being stored on centralized exchange platforms.
Below is a chart provided by the analyst that illustrates the trajectory of this indicator over the past few years.
As you can see from the chart above, the Spot Bitcoin supply (blue line) has recently declined, suggesting that investors are withdrawing their coins to self-custodial wallets.
Generally speaking, one of the main reasons investors hold their coins on spot platforms is to sell, so the BTC spot supply can be viewed as an estimate of the available supply of the cryptocurrency to sell. As such, investors withdrawing their coins from this supply can naturally be a bullish signal for Bitcoin.
However, currently, the BTC spot market is not the only factor influencing the asset price, as another form of exchange has gained popularity over the past few years: paper BTC.
Paper BTC refers to cryptocurrency derivative contracts that do not require users to hold any tokens. With Paper BTC’s growing dominance, its influence on the market has become quite perceptible.
In the chart, the purple line represents the total BTC inventory on the exchange, i.e. it shows the sum of BTC in spot and paper transactions across platforms.
It appears that while Spot BTC itself has recently fallen, the same has not been true of the combined supply of Spot and Paper BTC, which continues to move sideways. This would imply that Paper BTC is being printed at roughly the same rate as Spot BTC, which investors are withdrawing.
The rise in Paper BTC is not a good sign for Bitcoin in general, so it could hinder BTC’s growth. However, Woo notes that the situation could change quickly if a compact squeeze occurs in the market.
A “squeeze” refers to an event where a mass number of liquidations occur at once, so a compact squeeze in particular will naturally mean that a mass number of compact liquidations will occur.
“Current supply and demand are neutral and bearish, but if some liquidations happen, there will be signs of a transition to a bullish structure,” the analyst says.
BTC price
Yesterday, the price of Bitcoin crossed the $61,000 level, but today it has apparently seen a decline as it is currently hovering around $59,600.
Featured image from Dall-E, woocharts.com, chart from TradingView.com
