On-chain data shows the Bitcoin addresses depositing to exchanges have continued their decline recently, a sign that could be bullish for the price.
Bitcoin Exchange Depositing Addresses Now At Lowest Since 2016
As explained by an analyst in a CryptoQuant Quicktake post, the Bitcoin Exchange Depositing Addresses metric has plunged recently. The “Exchange Depositing Addresses” refers to an indicator that keeps track of the total number of unique addresses making inflow transactions to exchanges.
When the value of this metric is high, it means many users are making transactions to wallets associated with centralized exchanges. As one of the main reasons investors may deposit to these platforms is for selling-related purposes, this trend can have a bearish impact on the asset.
On the other hand, the low indicator suggests not many investors are interested in depositing their coins into the custody of exchanges, which can be a bullish development.
Now, here is a chart that shows the trend in the Bitcoin Exchange Depositing Addresses over the last few years:
Looks like the value of the metric has seen a decline recently | Source: CryptoQuant
As is visible in the above graph, the Bitcoin Exchange Depositing Addresses have declined overall since the end of 2021, suggesting that the appetite for using these platforms has been down.
The indicator briefly broke its downtrend during the rally to the new price all-time high (ATH) earlier in the year due to the surge’s attention.
However, since the asset has topped out and fallen to its consolidation, the Exchange Depositing Addresses has resumed its downward trajectory. It hasn’t just gone back to the downtrend; it has seen a notably sharp decline than before.
Thus, it would appear that the appetite for selling through exchanges may have plunged among the investors. This could naturally prove to be bullish for the cryptocurrency’s price.
However, the significantly sharper downtrend this year may also have another contributing factor: the presence of the spot exchange traded funds (ETFs). The spot ETFs finally got approved by the US Securities and Exchange Commission (SEC) at the start of this year and have since gained popularity.
The spot ETFs provide an alternative means of exposure to Bitcoin in a mode familiar to traditional investors. Thus, many investors who never understood how cryptocurrency wallets and exchanges work may have switched to these ETFs.
This switch may have been masked by the rally in the early months of the year, as activity related to the asset had spiked across the board. Still, since the hype has died off, it has become apparent that the exchanges have been losing relevance in the Bitcoin sector.
BTC Price
At the time of writing, Bitcoin is trading at around $58,000, up more than 2% over the past week.
The price of the asset appears to have plunged over the last day | Source: BTCUSD on TradingView
Featured image from Dall-E, CryptoQuant.com, chart from TradingView.com