- A recent post by Santiment explores several on-chain indicators that may provide some clues about whether BTC can sustain any bullish tendencies at the moment.
- The first relevant metric is the ‘exchange supply,’ which tracks the percentage of the total Bitcoin supply currently held in wallets on all centralized exchanges.
- Historically, rallies require a significant amount of investor interest, and such movements often require substantial fuel.
Bitcoin is struggling to break above the critical $28,000 resistance; why is it so challenging to surpass this resistance? On-chain metrics shed light on the reasons!
Bitcoin Struggles Above $28,000
In a recent post by on-chain analytics firm Santiment, several on-chain indicators have been examined to provide some hints about whether BTC can sustain any bullish tendencies at the moment.
The first relevant metric is the ‘exchange supply,’ which tracks the percentage of the total Bitcoin supply currently held in wallets on all centralized exchanges. When this metric decreases, it signifies withdrawals are currently taking place on these platforms. Investors typically move their funds to self-custody wallets when they intend to hold for the long term, so such a trend can have a bullish effect over the long run.
Conversely, a reverse trend may indicate that holders are currently depositing a net amount of cryptocurrencies onto exchanges. Here’s a chart illustrating the trend in Bitcoin supply on exchanges over the past few months:
As the chart illustrates, Bitcoin’s supply on exchanges has been consistently decreasing over the past month. This naturally indicates that investors are withdrawing a net amount of coins from these platforms.
As mentioned earlier, if investors are accumulating with these withdrawals, it might have a bullish effect in the long term, although this effect may not be directly associated with the current price increase. However, we can at least consider the net withdrawals from a different perspective as no substantial deposits are happening at the moment. As the chart shows, the rapid rally at the end of August came to an abrupt end when investors quickly deposited significant amounts of BTC onto exchanges.
For now, such selling pressure does not appear to be present, potentially allowing for an upward movement. Another indicator highlighted in the chart, unlike the exchange supply, does not seem to indicate a positive trend. This metric is the ‘daily active addresses,’ which tracks the number of unique addresses participating in transaction activity on the blockchain. This indicator currently shows the lowest levels since the end of August, suggesting low user interest in the asset at the moment.
Historically, rallies often require a significant amount of investor interest, and such movements typically necessitate substantial fuel. The current recovery appears to lack such investor activity.
The Importance of the $27,900 Resistance
Furthermore, the $27,900 level currently acts as a significant resistance point because this is where the average cost basis for short-term holders lies, as noted by CryptoQuant analyst Maartunn.
In conclusion, breaking significantly above the $28,000 level in the near future could be challenging for the cryptocurrency unless there is a rapid turnaround in user interest.
