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Bitcoin prices are trending higher, but the big players seem hesitant to participate in the current rally.

Falling Bitcoin Reserves

The on-chain data shows that the reserves of exchange, digital asset banks and BTC miners are relatively lower. Over the past few weeks, the spot price of BTC has climbed over 40%, reaching a low of around $15,300 recorded in Q4 2022. Bitcoin has now risen to retest $23,300, hitting a new high in the first quarter of 2023.

Bitcoin price on January 23
Bitcoin Price January 23 | Source: BTCUSD on BitStamp, trading view

As history shows, the surge in Bitcoin prices is likely to rely on strong support, mostly from heavyweights including miners and digital asset banks.

Bitcoin miners tend to have large reserves of BTC at all times, as they need to liquidate from time to time, to cover operating costs. In recent months, following falling Bitcoin prices coupled with a high hash rate potentially making mining success more difficult, their reserves have dwindled.

Review of Bitcoin Miners Reserves and Digital Asset Banks

According to streamsBTC reserves fell from 1.847 million on January 12 to 1.836 million in January 2023. Meanwhile, the price of Bitcoin has been on a bull run, wondering if the pump is on an empty reservoir.

It should be noted that miners tend to unload their coins when they are unsure of the price trajectory in the coming weeks and months.

Their deluge of selling punctures the bullish momentum and could even drive the coin lower. However, when miners are confident about what lies ahead, they accumulate, expecting the change in trend to result in net profits on their side. Therefore, the current divergence between mining reserves and prices could be a bearish signal.

In addition to minors, reserves of digital asset banks are dwindling. Digital asset bank reserves refer to BTC held by these regulated institutions. Over the past few months, following the collapse of FTX, Alameda Research and the effects this has had on other players including DCG and Genesis Global, their activity has been almost non-existent.

The contraction means institutions are playing it safe and may not be willing to hoard and store their coins in these ramps. During the last bullish cycle, from 2020 to 2021, there was notable activity among digital asset bankspointing to a possible interest of the institutions.

While traders and optimists alike may interpret the recent rally in crypto prices as a net positive for BTC, the lack of leads, judging by institutional activity, raises questions as to whether the current rally would last longer.

There could be a regulatory angle affecting the involvement of digital asset banks. Government agencies are asking if venture capitalists and crypto service providers did their due diligence before being exposed to crypto in the last bull cycle.

At the same time, some digital asset banks are reducing their exposure to crypto, which is affecting the business.

Feature image by Dado Ruvic/Reuters, chart by Trading View



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