Bitcoin Exchange Deposits Decline to Multi-Year Lows as Federal Reserve Meeting Approaches

Cryptonews Economy John Brightwater September 19, 2024

Bitcoin Exchange Deposits Decline to Multi-Year Lows as Federal Reserve Meeting Approaches

Summary
Bitcoin exchange deposits have decreased significantly, hitting an eight-year low amid strong investor retention. Despite struggles to surpass $60,000, many holders are accumulating BTC, coinciding with expectations of a possible interest rate cut by the Federal Reserve. Currently trading at $58,726, Bitcoin shows potential for a price rebound, though it may risk lower support levels if the downtrend persists.

Bitcoin (BTC) is currently experiencing a notable decrease in exchange deposits, reaching levels not seen in the past eight years. This downturn in exchange activity occurs while Bitcoin’s price struggles to surpass the $60,000 threshold, contrary to the common pattern of heightened sell-offs under such circumstances. Rather than parting with their holdings, many investors appear to be opting to retain their assets, as indicated by a significant drop in the number of daily addresses transferring BTC to exchanges. Recent on-chain analytics reveal a decline in Exchange Depositing Addresses, which measure the inflow of Bitcoin to trading platforms. This metric peaked earlier in the year on March 5 but has steadily decreased since then. Notably, over the past week, the inflow of Bitcoin to exchanges has fallen by 19%, suggesting a marked shift in investors’ behavior towards holding rather than selling their coins. This decline in exchange activity aligns with prevailing market predictions regarding a considerable likelihood of a 50% chance for a half-point interest rate cut by the Federal Reserve at its upcoming meeting on September 18. Historically, when the selling pressures related to Bitcoin mitigate in anticipation of favorable economic conditions, it indicates that market participants are increasingly optimistic. This sentiment is further corroborated by a recent shift in Bitcoin’s funding rate, which transitioned to a positive status two days ago, following a protracted period of negative readings. As of the most recent update, Bitcoin’s funding rate stands at 0.003%, reflecting heightened demand for long positions compared to short positions. As of now, Bitcoin is trading at $58,726, which marks a continued decline since the preceding weekend. Nevertheless, the Chaikin Money Flow (CMF), an indicator that assesses the inflow and outflow of capital in the Bitcoin market, reveals a reading of 0.06. This indicates a bullish divergence as it suggests that market participants are accumulating more Bitcoin, particularly in anticipation of the Federal Reserve’s imminent decision. Should Bitcoin manage to rebound from its current position, it could potentially retest the resistance at $61,388, with the possibility of pushing the price towards $64,312. Conversely, if the accumulation stalls and the downward trend persists, Bitcoin may risk losing support at $54,302 and could even descend to the August 5 low of $49,000.

In recent months, Bitcoin has faced challenges breaking the $60,000 resistance level, leading to increased volatility in trading activity. The involvement of key economic events, such as Federal Reserve meetings and anticipated interest rate cuts, significantly impacts traders’ decisions and market behavior. The decline in exchange deposits often signifies a shift in investor sentiment towards holding digital assets, which can counterbalance selling pressure and suggest bullish prospects for price movements.

The prevailing trend of decreased Bitcoin exchange deposits, combined with rising accumulation indicators such as the Chaikin Money Flow and a shift in funding rates, reflects a strategic holding pattern among investors amid economic uncertainty. Should these trends continue, Bitcoin may see a potential upward movement, but should selling pressures re-emerge, there remains a risk of falling below critical support levels.

Original Source: beincrypto.com