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Is Bitcoin’s Supply Squeeze Signaling the Start of a New Rally?
In recent times, Bitcoin has been making headlines with its remarkable uptrend, which has left many investors wondering whether we are witnessing the start of a new rally. The answer lies in the supply squeeze currently being experienced by the cryptocurrency.
First and foremost, it is essential to understand that the Bitcoin market has seen a surge in spot market demand over the past month. As a result, the price of the digital asset has been on an upward trajectory, reaching new heights and breaking past previous resistance levels.
According to data from CryptoQuant, this increased demand in the spot market has led to a decline in fund flow ratio. This is a clear indication that users are withdrawing their funds from exchanges and holding them in private wallets. In most cases, this type of activity translates to a bullish signal, as it signifies reduced exchange activity which correlates with long-term market confidence.
Furthermore, the supply of Bitcoin has also been on a downward trajectory, resulting in a supply squeeze. According to our sources at CryptoQuant, the stock-to-flow ratio has spiked to 46.5k from a previous low of 37k. This significant surge is indicating that the supply of BTC is reducing while demand continues to increase. It goes without saying that when this happens, it sets off a chain reaction that drives prices up.
So what does all this mean? In simple terms, an uptick in Bitcoin’s spot market demand amid a rising scarcity (supply squeeze) has the potential to propel the cryptocurrency higher on its price charts through an increased buying pressure. Should these factors continue to play out as we expect, it is not unreasonable to anticipate BTC reclaiming $106,000 and possibly even pushing towards new heights.
However, if this recent correction witnessed over the past day persists, Bitcoin’s price may potentially decline to $102630 before another uptrend can be anticipated.
Source: ambcrypto.com
