KEY POINTS
- Crypto fund inflows added around $43 million last week
- Bitcoin supply on centralized cryptocurrency exchanges dropped to a six-year low
- Bitcoin was trading in the red zone at $41,779.79 Tuesday morning
The supply of Bitcoin held in centralized cryptocurrency exchange platforms dropped to a six-year low last week, while crypto fund inflows at asset managers saw an additional $43 million, recording an 11-week streak to reach $1.7 billion.
The cryptocurrency market saw a significant inflow of investment at asset managers such as 21Shares, Bitwise, CoinShares, Grayscale and ProShares in the past 11 weeks, according to a report by Coinshares.
Despite the surge, the total inflow represents a significant decline from the past two weeks' $346 million and $176 million.
"Digital asset investment products saw inflows totaling US$43m, the 11th consecutive week of inflows, but a marked decline relative to prior weeks. Recent price appreciation has also led to significant inflows into short positions as some investors see price downside potential," the report said.
Data indicate that investors are still focused on Bitcoin, the world's largest crypto asset by market capitalization, with an inflow of $20 million, recording a year-to-date total of $1.7 billion. The report said short-Bitcoin inflow recorded $8.6 million, which could be due to investors viewing its price rally as unsustainable.
"Bitcoin remains the primary focus of investors, seeing US$20m inflows, bringing year-to-date inflows to US$1.7bn. While short-bitcoin saw US$8.6m inflows, presumably as a proportion of investors see the current price rises as unsustainable," the report said.
Meanwhile, analysts at Bitfinex noticed a drop in the supply of Bitcoin held in centralized cryptocurrency exchanges to a six-year low in the past week.
"This means that deposits on centralized exchanges equal levels seen in 2017. This indicates a general decrease in intentions to sell," Bitfinex analysts said in a note sent to International Business Times, adding that a sustained reduction in the supply could be a bullish sign.
"A reduction in Bitcoin supply on exchanges is seen as a bullish sign since long-term or larger holders usually deposit on exchanges with an intention to sell," the analysts said. "Conversely, investors withdraw their BTC balances from exchanges with an intention to move it to cold wallets if they have a long-term investment horizon."
The supply of Bitcoin on exchanges is now at levels last seen in 2017, which could mean an "increased desire" among investors to continue holding the crypto asset at this level. According to the analysts, this is "a potential shift toward decentralized or self-custody solutions, or a general decrease in intentions to sell."
They explained that a "sustained reduction in exchange-held Bitcoin can have significant implications for Bitcoin's liquidity, volatility, and overall market dynamics."
Bitcoin, the world's oldest crypto asset, was trading in the red zone at $41,779.79 as of 6:40 a.m. ET on Tuesday. with a 24-hour trading volume up by 17.97% at $31,784,693,873. The latest price action represents a 1.42% decline in Bitcoin's value in the past 24 hours and a 0.1% gain over the last seven days.
Data from CoinMarketCap showed that Bitcoin's current circulating supply stands at 19,567,743 BTC with its value continuously dropping by 1.41% at a $817,873,089,726 market cap.
