Bitcoin (BTC) has been showing promising signs of upward momentum as its supply on exchanges continues to fall, dropping to 7.53%. This marks its lowest level since February 2018. With Bitcoin trading at $87,075.28 at press time, despite a slight dip of 0.95% over the last 24 hours, the shrinking supply and increased network activity signal a potential bullish phase for the cryptocurrency, despite ongoing market volatility.

Bitcoin’s Exchange Supply Shrinks

The most notable development in Bitcoin’s recent market activity is the significant drop in its exchange supply. As of now, only 7.53% of Bitcoin’s total supply is held on exchanges, a drastic decrease from previous levels. This reduction indicates that investors are choosing to hold onto their BTC rather than sell, signaling an increase in investor confidence.

This shift away from exchanges reflects a growing belief in Bitcoin’s long-term value, with more institutional and retail investors opting to “hodl” their BTC. As the supply on exchanges decreases, it can lead to heightened market volatility. With fewer coins available for trading, demand may begin to outstrip supply, creating upward pressure on the price.

The Impact of Decreasing Liquidity

Reduced liquidity in the market often results in increased price fluctuations. As more Bitcoin is held in private wallets or long-term storage, fewer coins are available to facilitate trading. This reduced supply on exchanges could cause larger price swings, especially when sudden demand arises, as fewer coins are available for quick buying and selling.

Historically, a decrease in exchange supply has been a positive indicator for Bitcoin’s price, as it suggests fewer sellers are willing to part with their holdings. With fewer Bitcoins circulating in the market, any increase in demand could lead to significant price gains, providing the ideal conditions for a bullish phase.

Rising Bitcoin Network Activity

Alongside the declining exchange supply, Bitcoin’s network activity has also seen an increase, further reinforcing the potential for upward momentum. Active addresses on the Bitcoin network have grown by 1.16%, reaching a total of 10.17 million. This uptick indicates that more users are interacting with the network, whether by sending or receiving funds.

Additionally, the transaction count has risen by 0.74%, surpassing 418,000 transactions. These increases suggest that Bitcoin is seeing more engagement, which could lead to higher demand for the cryptocurrency. As more people become active on the network, it could create upward pressure on the price, driving Bitcoin toward new highs.

Positive Technical Indicators for Bitcoin

Technical analysis also provides reasons for optimism regarding Bitcoin’s future price action. According to Fibonacci retracement levels, Bitcoin has found support at the 0.236 level, which is around $81,325. This level is crucial as it indicates that Bitcoin has a solid foundation and could potentially move higher if it maintains this support.

The Relative Strength Index (RSI) stands at 51, which signals that Bitcoin is neither overbought nor oversold. This neutral reading suggests that there is still room for price movement, with the potential for either a breakout or a pullback. However, the current support levels and rising network activity point to a bullish scenario in the near future.

Balanced Market Liquidity

Bitcoin’s liquidation data also shows that the market is relatively balanced at this moment. Liquidations of both long and short positions are nearly equal, with $3.65 million in long liquidations and $3.56 million in short liquidations. This balance indicates that there is no overwhelming pressure from either side, which could lead to a stable foundation for Bitcoin to break out if demand increases.

Conclusion: Potential for a Bullish Phase

In conclusion, Bitcoin’s reduced supply on exchanges, coupled with rising network activity and promising technical indicators, suggests that BTC could be entering a bullish phase. The growing number of holders, along with key support levels in place, points to upward momentum. While short-term volatility may still affect the market, Bitcoin’s current market conditions indicate that it is poised for potential price growth in the near future.