Bitcoin Rally Still Has Some Legs Left, Santiment Explains Why

The analytics firm Santiment has explained that the current Bitcoin rally could still have some legs left, based on this on-chain trend.

Bitcoin & Ethereum Leave Exchanges, While Tether Sees Deposits

In a new post on X, Santiment has discussed the recent trends in the Supply on Exchanges for the three largest assets in the cryptocurrency sector: Bitcoin (BTC), Ethereum (ETH), and Tether (USDT).

The “Supply on Exchanges” here refers to a metric that keeps track of the percentage of the total circulating supply of any given coin that’s currently sitting in the custody of the centralized exchanges.

When the value of this metric goes up, it means that the investors are depositing their coins to these platforms currently. On the other hand, a decline implies net withdrawals are occurring on the exchanges right now.

What these trends suggest for the given asset and the sector as a whole depends on the type of cryptocurrency it is in question. In the case of volatile coins like Bitcoin and Ethereum, net deposits can be a sign that investors are looking to sell these assets, which can naturally have a negative impact on their prices.

Since the altcoins generally only see a rotation of capital through these largest cryptocurrencies, a bearish trend for them can have a domino effect on their prices as well.

Withdrawals for these volatile coins, on the contrary, can be bullish for the market, as they imply the investors are perhaps looking to hold onto their tokens for extended periods.

Now, here is a chart that shows the trend in the Supply on Exchanges for Bitcoin and Ethereum over the past year:

As displayed in the above graph, the Bitcoin and Ethereum Supply on Exchanges have continued their downtrend following the spot ETF approvals for BTC a few weeks back.

In the same chart, Santiment has also attached the data of the indicator for Tether. It would appear that while BTC and ETH have seen supply move off exchanges, USDT has observed net deposits.

The largest stablecoin in the sector has witnessed around 4% of its entire supply shifting to these platforms over the last five weeks, which has taken the indicator’s value to the highest point in almost ten months.

Investors use stablecoins whenever they want to escape the volatility associated with assets like BTC and ETH. Such holders who seek safe haven in these fiat-tied tokens instead of fiat itself, though, usually plan to return back to the volatile side of the cryptocurrency sector eventually.

Deposits of stablecoins can, therefore, be a sign that these investors want to buy back into Bitcoin and others. As such, the sector could see a bullish effect from this dry powder being deployed by the stablecoin holders.

“The increase in buying power implies that the mid-term 3+ month #bullcycle (starting back in October) could still have some legs, particularly with just 79 days until the #Bitcoin halving, estimated to occur on April 18th,” notes the analytics firm.

BTC Price

Bitcoin has made some notable recovery over the last few days as its price has now broken back above the $43,300 mark.

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