First Mover: Bitcoin Low Exchange Balance Looks Bullish but Chart Looks Bearish as $11K Nears

Bitcoin balances on exchanges hit two-year low, seen as a bullish sign that traders are holding for the long term, or tokenizing for use in DeFi.

Sep 28, 2020 at 12:44 p.m. UTC
Updated Sep 14, 2021 at 10:01 a.m. UTC

There's a degree of transparency in cryptocurrencies that doesn't exist in traditional markets like stocks and bonds: Thanks to data that's easily extracted from blockchains, everyone can see everyone else moving their money around. 

That means traders can keep an eye on exchange wallets to gauge whether investors and crypto miners are getting their bitcoin into position for a possible sale – or taking balances down from the exchanges in anticipation of holding for the longer term.

The latter might be what's happening now, CoinDesk's Muyao Shen reported Monday. Total balances of bitcoin on major exchanges has hit its lowest levels since November 2018. It could be an indication of bullishness among bitcoin traders.

“There’s no reason to sell now," Mike Alfred, CEO of Digital Assets Data, told Shen in a phone interview. “Why would you be selling when you’re at the beginning of a wave of potential corporate treasuries and institutional investors coming in?”

Another interpretation, according to Arcane Research, is that traders are taking their bitcoin off exchanges to deploy them in the decentralized finance sector, known as DeFi. Juicy returns can be obtained from tokenizing crypto assets and depositing them as collateral in semi-automated, blockchain-based trading and lending platforms.

As CoinDesk reported earlier this week, tokenized bitcoin has become one of the largest assets on DeFi. Currently, there are more than 108,000 BTC worth some $1.1 billion minted from seven issuers, according to Dune Analytics.

That might be another bullish sign. 

"Bitcoin maximalists would decry the use of bitcoin on Ethereum, arguing that it isn’t 'real' bitcoin," David Derhy, an analyst for the cryptocurrency trading platform eToro, wrote Monday in an email. "I view this development as positive for the sector, as it highlights an evolution within the industry."

Whatever the case, it's all there to see.

Bitcoin balances on all exchanges have fallen to the lowest since 2018.

Bitcoin Watch

Bitcoin's weekly price chart shows that the MACD histogram has just tipped negative.

Bitcoin's upward momentum is again running out of steam near the psychological resistance of $11,000.

The cryptocurrency clocked highs near $10,950 early Monday and is currently trading near $10,850.

The cryptocurrency's weekly chart MACD histogram, an indicator used to identify trend changes and trend strength, has dipped below zero for the first time since March, indicating a bearish shift in the broader trend.

Similarly, the 5- and 10-week averages have produced a bearish crossover. As such, bitcoin could face chart-driven selling pressure. 

On the higher side, $11,000 is the level to beat for the bulls.

- Omkar Godbole

Token Watch

Bitcoin (BTC): Market cap could swell to $1-5T in next 5-10 years, from about $200B now, as largest cryptocurrency becomes settlement system for banks and businesses while taking 10% share of physical gold market, Coin Metrics says in report with ARK Invest

Bitcoin: (BTC): Largest cryptocurrency breaks record for longest streak of days above $10K, now at 63 days.

Ether (ETH): On-chain data suggests Ether investors bought September dip

Uniswap (UNI): Uniswap is now bigger than the entire decentralized finance space just two months ago, as trading protocol becomes first to pass $2B milestone.

Uniswap (UNI), Balancer (BAL), Curve (CRV): Gemini lists DeFi tokens following Binance, Huobi and OKEx in succumbing to FOMO. 

Tether (USDT): Bitfinex, the cryptocurrency exchange affiliated with the dollar-linked USDT stablecoins, has launched perpetual contracts tracking European equity market indexes, settled in USDT.   

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