On November 24, the Bitcoin price surpassed $19,000 for the first time since 2017 and most indicators suggest that the rally may continue in the near-term. The flagship crypto reached these levels last seen during its historic rally in December 2017. Three main reasons are behind the crypto’s latest rally.
The key factors that support this rally are whale accumulation, explosive volume trends, and decreasing exchange supply.
Whales Still Hodling Bitcoin
Throughout this November, reports have come up of whale clusters that have steadily formed as the BTC continues to rally. The clusters arise when Bitcoin whales purchase BTC at one price and avoid moving them. Analysts believe that this is a signal that the whales are accumulating and that they do not intend to sell in the near-term.
The difference between the current rally and the previous bull cycles is that the recent uptrend seems to be more sustainable. Interestingly, every whale cluster indicates that each major support level Bitcoin reclaimed came with a whale accumulation.
Bitcoin dropped to as low as $17,200 on November 18. On that day, Whalemap analysts stated that the new whale support is strongly developed at $16,411. They said:
“Bubbles indicate prices at which whales have purchased BTC that they are currently holding. Bubbles also visualize support levels. Last time we bounced from $15,762 and had a 15% price increase. Is the new bubble at $16,411 going to hold this time as well?”
Since that time, Bitcoin has experienced several other dips below $18,000 but it has managed to recover the $18,800 handle, sustaining a strong momentum. Moreover, data from Santiment which is an on-chain market analysis platform represents a similar trend. In recent months, Santiment analysts have discovered that the number of bitcoin whales has increased significantly in recent months. They commented:
“The amount of #Bitcoin whales with at least 10,000 coins (currently $185M or more) has ballooned to 114 the past couple days as prices soared above $18k. Additionally, the amount of holders with at least 1,000 $BTC ($18.5M) has hit an ATH of 2,449!”
Bitcoin’s Supply Is Scarce
One constant trend all through the 2020 bull cycle was the constant drop in bitcoin exchange reserves. Whales and investors deposit bitcoin to the exchanges whenever they want to sell their coins. Thus, the recent drop in exchange reserves indicates that sellers are few in the market.
One pseudonymous trader known as “Byzantine General” explained that every time spot exchanges increase their bitcoin reserves, they then get accumulated. He stated:
“Everytime spot exchanges add to their $BTC reserves it gets depleted almost immediately. Don’t you get it? There’s literally not enough supply.”
Volume Is Increasing
The volume of both the institutional and spot exchanges have been increasing steeply since September. Open interest on the BTC futures together with options at CME surged above $1 billion in November while Binance’s BTC/USDT pair has delivered at least $1.5 billion in daily volume.
Different data points also indicate that the spot market has been underpinning this rally, not the derivatives or the futures markets. That trend makes the rally more stable, and it reduces the risk of massive corrections.
When the futures market accounts for most of the volume during a Bitcoin surge, there is a huge risk of cascading liquidations. This time around, the spot market has been leading the rally, which is making it sustainable so far.