While Bitcoin takes a short break, the sell-off on the stock exchanges continues.
Ethereum is also riding high among buyers. How long will the stock market hold up to the hype?
After turbulent previous weeks, the Bitcoin price (BTC) is currently running out of steam somewhat. The major resistance at $40,000 currently still seems to be too big an obstacle for the bulls. On a daily basis, the cryptocurrency has slumped by 1.2 percent and is traded at 38,263 US dollars at the editorial deadline.
Bitcoin price in the weekly chart
Ethereum (ETH), on the other hand, has posted a significant gain of 5.9 percent in the last 24 hours, climbing to a current level of 1,227 US dollars. The recaptured ground above the thousand mark is thus gradually gaining substance. If Ethereum continues to gain at the same pace, the 2018 all-time high of 1,450 US dollars should be updated soon.
Ethereum holdings are melting down at a record pace
The trend of dwindling exchange reserves that has been evident since 2020 has continued into the new year, and has been exacerbated by the rally of the last few weeks of trading. The drawdown of Ether reserves at major Exchanges is particularly drastic. In just 48 hours, Ether holdings have dropped from 10.9 million to 8 million Ether, a 25 percent drop, according to Cryptoquant. If this trend continues in the coming weeks, demand threatens to gradually outstrip supply.
As can be seen from the chart, the Ether meltdown on crypto trading venues is directly related to the recent jump in prices. In this respect, the rapid Ether decline is not an alarming signal, but on the contrary, an indication of an ongoing bull cycle. The tightening of Ether stocks is gradually pushing the price towards all-time highs, hinting at the growth potential that remains to be exploited beyond that.
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Bitcoin reserves buckle
The same pattern can be seen when looking at the bitcoin reserves of crypto exchanges. Since the corona-induced market crash in mid-March last year, bitcoin reserves have also been gradually melting away. While there were just under 3 million BTC at the time, there are currently just over 2.3 million BTC units. In just ten months, BTC holdings have thus fallen by 21 percent, while the „BTC unit price“ has risen by 645 percent in the same period. Limited holdings are gradually crumbling away.
However, it is highly unlikely that the exchanges will soon run out of Bitcoin. As with Ethereum, rising demand is turning out to be a constant price driver for Bitcoin. However, the more Bitcoin increases in price, the fewer BTC units are withdrawn in total.
However, even if the exchanges are likely to manage their stocks for a while longer, the trend suggests a future scenario in which the exchanges will no longer be able to meet demand. The cyclical halving that is taking place is also throttling the circulating supply and could eventually lead to an across-the-board sell-off in a few years. Private traders could then take over ever larger market shares and compete with the exchanges. Whether it comes to that remains to be seen. After all, the exchanges also regularly replenish their reserves. But one thing is certain: as long as demand continues to rise, the crypto market is set for growth.