Bitcoin held at exchanges at very low levels compared with previous tops...

Historically, when bitcoin has topped out, there has also been a surge in the amount of bitcoin being held at exchanges.

Which makes sense, right?

When the price goes up and people are wanting to sell their coins, they move them to exchanges.

That is exactly what we saw back in early 2019 and again in early 2020.

Check it out:

(Source: https://twitter.com/glassnode/status/1296087237365575686/photo/1)

As you can see, as the price shot up, so did the balance of bitcoin being held on exchanges.

Also interesting to note is that both times this happened, we saw a significant drop in the price of bitcoin not long after.

What is this telling us?

In very short form and plain English, this is likely telling us that we are not near a top.

If you look at the above chart, the price of bitcoin and exchange balances have tended to move together, they are positively correlated, at least they have been.

However, when you get to the far right side of the chart, where we are currently, you see that the have completely diverged from each other.

The price climbs higher and the number of bitcoin on exchanges continues to grind lower...

Why is this happening?

My guess is this is mostly related to the defi phenomenon.

People are locking up their bitcoin and ethereum in defi projects chasing yield.

For this reason they are pulling bitcoin off of exchanges and locking them up in these defi projects.

Last I checked there was close to $10 billion locked up in defi currently.

A number that will probably keep climbing in the near term.

So, not only is the defi craze helping the coins that are seeing astronomical returns, but it's also removing supply off exchanges that may have been readily sold.

Stay informed my friends.

-Doc

Posted Using LeoFinance