Bitcoin price continues balancing act as BTC supply on exchanges hits six month low
- Bitcoin liquidity continues to tighten as BTC reserves on exchanges hit a six-month low.
- Analysts have identified an emerging bullish setup in the Bitcoin price chart, targeting $53,000.
- Tom Lee of Fundstrat has predicted Bitcoin price could hit $200,000 as capital flows out of bonds and into crypto.
Bitcoin’s overall liquidity is shrinking as the overall BTC balance on exchanges drops. The asset’s liquidity has hit a six-month low. Proponents consider this a bullish catalyst for Bitcoin price.
Analysts predict Bitcoin price rally as liquidity tightens
Bitcoin price suffered a nearly 40% drop over the past 90 days; however, analysts believe that recent events could increase the asset’s price. Bitcoin reserves on exchanges have dropped nearly 10%, hitting a new low over the past six months.
Cryptocurrency exchanges now hold less than $100 billion in Bitcoin, nearly 12% of the asset’s market capitalization. Historically, a price rally follows the shortage of supply and liquidity tightening in Bitcoin.
Analysts have identified a key indicator that supports a bullish outlook for Bitcoin price.
Bitcoin’s price trend has formed a reverse head and shoulders pattern, viewed as an indicator that suggests a flip in the downtrend. The crypto’s price started an uptrend earlier today, posting 4% daily gains.
Analysts have set a target of $53,000 for Bitcoin price if the asset can break the neckline of the reverse head and shoulders at $44,600.
Recently, there has been a spike in active investors in the Bitcoin market. A spike in activity coupled with the supply shortage on exchanges could fuel a Bitcoin price rally.
According to crypto intelligence firm Ecoinometrics, Bitcoin’s correlation with the stock market has remained exceptionally high. Events that negatively impact the stock market could lead to a correction in Bitcoin.
US stock market prices have remained under pressure in anticipation of the Federal Reserve’s rate hike. This could negatively impact Bitcoin prices.
{4/5} The SP500 is already down 12% simply on the expectation that the Fed will do something.
— ecoinometrics (@ecoinometrics) February 15, 2022
If it turns out they need to do a lot more we could get a much larger correction.
That's not good for #Bitcoin. pic.twitter.com/LQJUvD804d
Yet institutional analysts continue to remain bullish on the flagship cryptocurrency. Tom Lee of Fundstrat, a market strategy firm, believes that Bitcoin price could hit $200,000. Lee expects US households to pull capital out of bonds and pour it into Bitcoin, as the asset hedges against inflation.
Author
Ekta Mourya
FXStreet
Ekta Mourya has extensive experience in fundamental and on-chain analysis, particularly focused on impact of macroeconomics and central bank policies on cryptocurrencies.
