If flows between cryptocurrency exchanges and individual digital wallets are any indication, Bitcoin’s remarkable 2023 rise may still have some more to run, according to Bank of America Corp strategists.
The week ending April 4 saw the second-largest net outflow of Bitcoin from cryptocurrency exchanges, with $368 million moving to personal wallets, according to analysts Alkesh Shah and Andrew Moss.
According to them, “Investors transfer tokens from exchange wallets to their own wallets when they intend to hold them (or HODL), indicating a possible reduction in sell pressure.” A meme in the cryptocurrency industry that refers to hanging onto tokens for a long time is called “HODL.”
The outflow from exchanges may have been sparked by worries about the US regulatory crackdown on digital-asset platforms, according to a note from BofA strategists issued on Monday.
A contentious discussion on why the largest token is recovering from a collapse in 2022 has been triggered by Bitcoin’s year-to-date rise, which has outpaced other asset classes.
Some economists contend that riskier investments like cryptocurrency benefit from future Federal Reserve interest rate reduction forecasts. Other arguments, which are frequently contested, include the coin’s purported ability to avoid financial stress or its potential to hedge inflation as a form of digital gold.
The Bitcoin price surpassed $30,000 this week for the first time since June 2022. The token has increased by almost 80% since December 31, outpacing the 19% growth of the Nasdaq 100 tech index. The increase in gold is about 9%.
Despite vigorous steps taken by US regulators following the collapse of FTX and other crypto companies, the value of digital tokens increased in 2023. Following the bankruptcy, the crypto market’s liquidity and trade volumes have decreased, which has coincided with the rally.
Before any significant technical correction occurs, I expect Bitcoin to rise toward the $33,000 mark, according to Nathan Batchelor, managing partner at analytics platform Biyond Trader. “Bitcoin no longer responds to negative news. This is an indication of a healthy buyers’ market.
Garry Krugljakow, the developer of 0VIX, an open-source protocol used for lending and borrowing in decentralized finance (DeFi) based on blockchain, suggests that traders are holding off until they receive additional confirmation of Bitcoin’s upward price movement.
He said this week’s economic data might offer that cue, especially Wednesday’s US consumer price index. A Bloomberg News survey’s median prediction predicts a 5.1% increase in March compared to last year.
According to Krugljakow, “anything below 5.2% or about 5.2% might lead to a bullish continuing for” Bitcoin. “A minor shock and dampening of the current price activity will most likely occur at 5.3% or higher.”
In contrast to Bitcoin, BofA reports that the net inflow of Ether to cryptocurrency exchanges in the week ending April 4 was the highest in 2023. That comes before the biggest major update to the Ethereum blockchain since the Merge last year.
The so-called Shanghai update results from years of development and alters how Ethereum functions. BofA strategists predict increased volatility around the transition, partially due to diminished liquidity, exchange inflows, and derivatives activity, even if they do not directly anticipate the event to trigger selling pressure.
According to a barometer of the top 100 digital assets, Ether, the second-largest token after Bitcoin, has increased by around 55% this year. As of 11:20 a.m. on Wednesday in Tokyo, Ether was down 1.7% at $1,863, while Bitcoin was down less than 1% at around $30,000.