The dominance of Bitcoin (BTC) in the cryptocurrency market continues to be evident as exchange balances have dropped to levels last observed in early 2018. This is indicative of a growing trend among investors who are moving their Bitcoin holdings to cold storage, which is widely considered to be more secure. Although some of the decline in exchange balances may be attributed to the usage of decentralized exchanges and funds not covered in the data, the overall trend seems to be a widespread movement of people withdrawing their Bitcoin from exchanges, as per a recent report by Bitfinex.
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Bitcoin exchange balances hit 2018 lows. Bitcoin-Backed Funds Lead Crypto Investment Surge
This trend is also reflected in the recent data from CoinShares, which shows that traditional fund investors are demonstrating a renewed interest in Bitcoin. Bitcoin exchange balances hit 2018 lows.
Last week, crypto-backed investment funds experienced a net inflow of $137 million, with 99% of the sum directed towards Bitcoin-backed funds. This marks the fourth consecutive week of gross inflows into crypto funds, totaling $742 million over the period, which is the largest run of inflows since the final quarter of 2021. The sustained inflows into Bitcoin-backed funds suggest strong investor confidence in the asset, despite the inherent volatility in the crypto market. The outflows from short-Bitcoin funds reinforce the bullish sentiment for the BTC price among investors, which has now been in a tight range for months. This data can be used as a proxy for institutional investor bias that the price will break out of this range towards the upside.
Meanwhile, Ethereum funds were the only other category to see outflows last week, losing $1.6 million on a net basis. Altcoin funds, on the other hand, recorded slight inflows, with the largest going to multi-asset funds, followed by funds backed by Solana’s SOL token and Polygon’s MATIC.
Overall, this data indicates Bitcoin’s continued dominance in the crypto market. While altcoins are making their presence felt, traditional fund investors still prefer Bitcoin as their asset of choice. The sustained inflows into Bitcoin-backed funds suggest that investors have confidence in the asset’s long-term growth potential, despite the short-term volatility in the crypto market.
BTC Whales Increased Activity Indicates Bullish Market Sentiment
Glassnode's report reveals that whales, or entities holding 1,000 or more BTC, have been making significant moves in the cryptocurrency market. Whale inflows to exchanges have been historically large, accounting for 41% of the total. Over 82% of these inflows are destined for Binance, the largest exchange in the industry. This trend highlights the importance of the role played by whales in the cryptocurrency market, as their activity can have a significant impact on the price and overall sentiment of Bitcoin.
The report notes that many of these active whale entities are classified as short-term holders, with notable activity around local market peaks and troughs. However, it also highlights the long-term behavior of whales. Glassnode’s Trend Accumulation Score by Cohort shows that the smallest entities with less than 100 BTC have slowed down their spending over the last month.
On the other hand, the whale subdivisions with more than 1,000 BTC demonstrated divergent behavior, with those holding more than 10,000 BTC distributing and those holding between 1,000 and 10,000 BTC accumulating at a significantly higher rate. This behavior suggests that whales are actively reshuffling their holdings, moving funds internally between entities. While this can have short-term implications for the market, it also highlights the long-term potential for Bitcoin to remain a valuable asset for investors.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.