Bitcoin’s upward momentum can face short-term exhaustion

Bitcoin (BTC) began the year on propitious grounds, rallying from $16,541 on Jan. 1 to a peak of $31,000 on April 14. However, the asset’s upward momentum faced a massive hurdle in mid-April, leading to intermittent declines that have brought it below $28,000. 

A recent analysis of the prevalent market conditions suggested that bitcoin’s upward momentum could face short-term exhaustion. The analysis shared on CryptoQuant highlights three factors contributing to the opposition to the asset’s upward pull.

The analysis drew attention to the drop in the cumulative bitcoin balance of institutional investors in the United States. The balance held by these institutions has continued to decline in recent months. According to the report, this could be ascribed to transitioning from US-based exchanges such as Coinbase to decentralized exchanges and global platforms. 

The shift is likely an attempt to hedge against any potential enforcement action from the US SEC on any US-based exchange. The regulatory watchdog has been rampaging recently, intensifying its enforcement against crypto-focused entities.

A decline in stablecoin supply & savvy money investors

The report highlighted the stablecoin supply as another potential factor behind the hurdle to bitcoin’s run. The supply of stablecoins in the market represents the buying capacity of market participants. Notably, this supply continued to rise from May 2020 until it hit a peak of $99 billion in February of this year.

However, the supply has witnessed persistent declines since February, recently dropping to a low of $71.1 billion. The last time the total supply of stablecoins saw this level was in late 2021. The decline in stablecoin supply signals a decrease in buying power.

The analysis further noted that the bitcoin market is witnessing a dearth of smart money investors. This refers to experienced and knowledgeable investors who make strategic investment decisions that can contribute largely to the price movements of BTC.

The BTC token transfer indicator shows bitcoin transfers between different addresses and hasn’t shown significant changes. This indicates that recent price changes are driven more by regular buying and selling rather than the influence of large investors.

The report acknowledged that BTC has the potential to rise from its current position. Still, this potential upsurge could be delayed by a combination of these factors and inauspicious macroeconomic conditions. Bitcoin is changing hands at $27,093 at the time of reporting, down 1.08% in the past 24 hours.