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Crypto Markets Analysis: Bitcoin, Ether Exchange Balances Take Divergent Paths
Investors have begun sending bitcoin to exchanges while continuing to remove ether.
Updated Feb 22, 2023, 9:24 p.m. Published Feb 22, 2023, 9:24 p.m.
Bitcoin and ether have parted ways in the inflow to and outflow from exchanges.
Net position metrics show that Investors are sending bitcoin to exchanges and removing ether from them. The moves imply bearish sentiment for BTC and bullishness for ETH, a departure from their more typical correlated paths.
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Exchange balances tend to increase when investors are considering selling an asset, or at least placing themselves in positions to do so quickly. Investors removing assets from exchanges implies that investors are looking to hold the asset.
The current trends don't necessarily predict longer-term future investor action, but they are noteworthy. Bitcoin trending bearishly would run opposite its average performance following a "golden cross," such as the one that the asset reached Feb. 18. Bitcoin’s price rose an average 8% following the seven golden crosses since 2015 that preceded the latest one.
A golden cross occurs when the price of an asset’s 50-day moving average surpasses its 200-day moving average.
Motivations?
What’s behind the latest movements?
BTC prices remain up 42% year to date, and investors may be unable to ignore the temptation of realizing profits. A key point to watch will be whether BTC movement onto exchanges rises. The current increase has been mild, which may reflect more that investors are looking to manage risk as the market seems to be emerging from a period of contraction than negativity.
ETH activity has been more pronounced because its exchange net position change has been negative in each of the last 13 days. ETH was removed from exchanges even as prices declined 10% between Feb. 7 and Feb. 13.
Year to date, BTC has outperformed ETH by approximately 8%, despite ether’s supply declining by 33,000 ETH since September.
The difference between BTC and ETH in exchange net position has not extended to the derivatives space. Funding rates for both bitcoin and ether remain positive, indicating that long-position traders are willing to compensate short-position traders to maintain their bullish stance.
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Coinbase Sees Crypto Recovery Ahead as Liquidity Improves and Fed Rate Cut Odds Climb
The crypto exchange also took note of a so-called AI bubble that continues to go strong and a weaker U.S. dollar.
What to know:
- Coinbase Institutional is seeing a potential December recovery in crypto, citing improving liquidity and a shift in macroeconomic conditions that could favor risk assets like bitcoin.
- The firm's optimism is driven by rising odds of Federal Reserve rate cuts, with markets pricing in a 93% chance easing next week, and improving liquidity conditions.
- Several recent institutional developments, including Vanguard's crypto ETF policy reversal and Bank of America's greenlighting of crypto allocations, have contributed to bitcoin's rebound from recent lows.
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