Exchange reserves plunge to pre-$61K lows: 5 things to watch in Bitcoin this week

Hodlers are being patient amid warnings that a continuation of Bitcoin’s bull run may take “some time” thanks to mixed messages from on-chain indicators.

Bitcoin (BTC) sees a cautious start to the week as macro markets dither and Turkey’s currency loses 15% of its value overnight.

After a disappointing weekend that featured a rejection at $60,000, Bitcoin has yet to impress traders, who are expecting sideways action in the coming days.

Cointelegraph takes a look at five factors that could influence how Bitcoin price action evolves as a new week gets underway.

All quiet among stocks

The picture across equities is one of hesitancy on Monday as concerns over bond yields remain and coronavirus bites.

It has become a familiar picture for many, Asian markets opened with modest movement. A rise in economic activity will likely fuel bond worries with 10-year Treasury yields already at 1.7% in the United States after gaining rapidly in recent weeks.

Taking a different tone, China revealed that it had more money to spend in financial easing, something which officials claim will reduce risk, rather than add to it.

“This will not only provide positive incentives for economic players, but also help create an environment less likely to spawn financial risks,” Yi Gang, Governor of China’s central bank, the People’s Bank of China (PBoC), said at the weekend.

At the same time, multiple jurisdictions are seeing a return to or continuation of coronavirus lockdown, amid anger at the lack of progress in lifting restrictions on individual freedoms despite vaccine rollouts and the onset of spring.

Separately, turmoil for Turkey saw its national currency, the lira, shed 15% as soon as trading opened. The embattled economy did not benefit from a dip in sentiment after President Recep Tayyip Erdogan fired yet another central bank chief.

“Turkey picks worst time to fire central banker,” market commentator Holger Zschaepitz responded.

“Erdogan removed hawkish Gov Agbal, replacing him w/professor who says high interest rates cause inflation. Widening CA deficit, depleted FX reserves & inflation at 16% make a currency crisis more likely.”

BTC price fails to wow

Two days of disappointment has greeted Bitcoin traders as last weekend’s rally failed to see a repeat performance.

While analysts tipped BTC/USD for a breakout at some point over Saturday and Sunday, no such luck was had, as the pair saw a firm rejection close to $60,000.

The result, which took some by surprise, was a dip below $56,000 before a modest recovery to $57,700 on Bitstamp at the time of writing.

In his latest market comments, Cointelegraph contributor Michaël van de Poppe was unperturbed by the events, as Bitcoin merely continued moving within a familiar corridor.

“Bitcoin is so far, so good and that’s great,” he told Twitter followers.

“The $55K region is an interesting point of interest after rejecting the $60K barrier. Expecting a sideways range for a little.”

Fellow Netherlands-based analyst and trader Crypto Ed confirmed a further light dip and rebound pattern overnight, with BTC/USD avoiding his scenario of a drop to under $52,000.

In an additional summary, Scott Melker likewise identified ranging behavior, summarizing price action as “still not much happening.”

Order book data from Binance highlighted the extent of the consolidation active on Bitcoin, with support and resistance closing in at $56,000 and $59,000, respectively, on Monday.

Difficulty continues into great unknown

Investors may be thirsty for fresh Bitcoin all-time highs, but two network fundamentals are already at or almost hitting new territory of their own.

At the time of writing, both hash rate and difficulty were firmly bullish — the former within 4% of all-time highs and the latter riding higher than ever.

A classic precursor to price upside, hash rate and mining difficulty underscore the strength and longevity of the current bull run. Hash rate provides an estimate of the computing power dedicated to processing transactions, while difficulty is an expression of the competition among miners for block subsidies.

At the latest automated readjustment on March 19, difficulty increased by 1.95%, marking a return further into uncharted territory after the previous adjustment ended up negative.

As Cointelegraph reported, such adjustments are an essential, if not most important economic feature of the Bitcoin network, allowing it to adapt to changing miner activity and maintain security.

“What critics refer to about Bitcoin being ‘speculative’ is that it provides no organic yield and never will, seeing it as ‘greater fool’ price appreciation,” popular Twitter account Parabolic Trav wrote about the phenomenon earlier this month.

“They fail to grasp the difficulty adjustment and the halving ‘Lesser supply reality’ counteracts ‘greater fool theory.’”

“Young” coins suggest bull run is far from done

Other on-chain indicators nonetheless paint a mixed picture of where exactly Bitcoin is in its bull cycle and how much price upside remains.

In terms of investor sentiment, however, there remains plenty of leeway, as longtime hodlers have still not been moved to sell en masse even at $60,000.

As analytics service Glassnode noted over the weekend, the proportion of coins belonging to older investors has not yet decreased in line with previous bull cycle tops, implying that there is longer to go before 2021 tops out.

At around $53,000, Bitcoin became a $1 trillion market cap asset — but this was still not sufficient incentive to awaken coins long held in storage.

“This is pretty solid price validation; $1T is already strongly supported by investors,” statistician Willy Woo commented on Glassnode data.

“I’d say there’s a fair chance we’ll never see Bitcoin below $1T again.”

Last week, meanwhile, Cointelegraph reported even more bullish prognoses from stock-to-flow price model creator PlanB, who forecast BTC/USD not stopping at $100,000 and continuing to an average of $288,000 this year.

Exchange reserves back near record lows

It’s not just well-known names favoring continuation. According to data from exchanges, the average hodler is bracing for the long haul and not planning to sell.

Compiled by on-chain resource CryptoQuant, inflows and outflows to major trading platforms are heavily skewed in favor of withdrawals, implying a lack of desire to sell or trade at short notice.

In fact, the weekend saw the largest outflows from exchanges since early March, just before Bitcoin hit current all-time highs of $61,700.

Last week, CryptoQuant CEO Ki Young Ju included the lack of exchange inflows among factors balancing some other, less impressive, indicator readings as part of the overall market picture. Bitcoin, he said, will likely take “some time” to beat its $61,700 record.

“I think BTC would take some time to get another leg up in terms of demand/supply,” he summarized.