Following indications that the fed will soon increase interest rates, many investors have started ramping up their BTC holdings. A Glassnode data revealed that nearly 18.5K BTC (worth about $675m) moved from exchanges on January 27. An amount that represents the largest outflow in one day in more than forty days. There were nearly 10K BTC that moved from Bitmex exchange alone.
What’s Causing The Massive Outflows?
Most long-term crypto investors often prefer to hold their digital assets directly instead of keeping them with exchanges. Hence, massive crypto outflows from exchanges are often interpreted as a sign of bullishness. However, some investors do not hold their coins for passive investments but rather tokenize them on the Ethereum blockchain to increase their yield earnings.
The number of wBTC has been rising over the last couple of years and in the last 12 months alone, it rose by 12,500. The wBTC is one of the top digital assets on the eth network as it is the first ERC-20 token pegged one-on-one with the leading digital asset.
Nevertheless, the higher the amount of crypto leaving exchanges, the greater the bullishness of the market as exchanges have fewer coins for sale. On January 26, the Fed implied a more hawkish stance on interest rates to combat the astronomic rise in inflation rates.
Following Wednesday’s meeting, the Fed fund futures would have five rate increases before the year-end, an increase of one before the meeting. Some analysts claim that the Fed’s focus on taming inflation might result in increased pressure over centralized liquidity-linked assets. BTC in a new bear market?
BTC’s price is now 50% off its peak price set two months ago. It is the second time in two years BTC would trade at the sub-$32k levels. Hence, it is no wonder that the crypto fear and greed index is now at extreme fear.
A metric that indicated that BTC is now in a bear market is the net unrealized profits (NUPL). Its current low rate of 32.5% indicates low profitability which suggests a bear market in its early to mid-phase. Furthermore, the MVRV ratio of 0.86 is also an indication of a bearish market.
A Glassnode report suggests that BTC bulls would need to intensify their buying efforts to rescue the control of BTC price from the bears. Also, the current RTLR (realized-to-liveliness) ratio confirms that BTC price is currently in an early-stage bear market.
Long-Term BTC Holders Remain Unworried
The good news is that most BTC supplies are in the hands of long-term holders. Hence, they would be unmoved by the current bearishness of the crypto market. On-chain crypto analytics firm, Macro Charts, opined that investors’ pessimism regarding the crypto market is currently at its peak.
The firm also claims that the current crypto investors’ bias is worse than the 2018 and 2020 dips. However, it is not the first time the crypto market has bounced back from similar bottomed-out scenarios. As of this writing, BTC trades at nearly $38K.