Bitcoin Cycle Shows A Never-Before-Seen Trend, Here’s What
The on-chain data shows a trend in the current Bitcoin cycle that differs from the pattern followed in previous epochs.
More Bitcoin has left exchanges during the current cycle so far
According to data from on-chain analytics firm glassnode, previous cycles saw the balance on exchanges record a net increase. The “balance on exchanges” here refers to the total amount of Bitcoin that is currently in the wallets of all centralized exchanges.
When the value of this metric increases, it means that investors are currently depositing a net number of coins on these platforms. On the other hand, a decline implies that pullbacks are taking place in the market right now.
Here is a chart showing how the value of this Bitcoin indicator has changed during the last two cycles and the current time so far:
Looks like the current cycle is showing a different trend than what was seen before | Source: Glassnode on Twitter
Glassnode took the “halves” as the starting point of each of the cycles or epochs here. Halvings are periodic events where miners’ block rewards (which they receive for solving blocks on the network) are permanently cut in half. These occur approximately every four years.
These events have far-reaching consequences for the cryptocurrency economy, as the asset’s production rate is capped after them. This narrative behind the halvings is also so strong that the peak of bull runs has always occurred after them.
From the graph above, it is visible that during epoch 2, that is, the second cycle that the asset observed, the Bitcoin balance on exchanges had a net growth of 1.02 million BTC. The next cycle, season 3, saw the metric increase by 1.97 million BTC, almost double what the previous cycle saw.
Note that epoch 1 is missing here because it was the first time the asset was traded and therefore BTC exchanges were just a new existence as well. This means that their supply could only have risen here, as it did not exist before.
Unlike those cycles, however, where exchanges received large numbers of net inflows, the current era has seen investors withdraw around 680,000 BTC from these platforms.
The chart below highlights how this decline in Bitcoin balance on exchanges came about.
The value of the metric seems to have been going down in recent months | Source: Glassnode on Twitter
As shown in the chart above, Bitcoin balance on exchanges peaked at 3.2 million BTC shortly before the COVID slump in March 2020.
“In retrospect, the Covid crisis appeared to be a catalyst for an inflection in participants’ interaction with exchanges, marking the beginning of a macro decline in exchange balances,” notes Glassnode.
Today, the indicator value is 2.3 million BTC, which suggests a 28% drop from the peak. This cycle is atypical in this metric, but it is worth remembering that the season is not over yet.
However, a reversal is unlikely to occur now to keep the current cycle in line with the pattern of previous cycles, as the next halving is not that far away anymore (2024).
BTC price
At the time of writing, Bitcoin is trading around $26,700, up 1% over the last week.
BTC has plunged in the past day | Source: BTCUSD on TradingView
Featured Image from iStock.com, Charts from TradingView.com, Glassnode.com