As Bitcoin (BTC) continues to move sideways in the $ 30,000 to $ 40,000 range, new data emerges on the potential for a bullish breakout.

Is Bitcoin calmly prepared for a breakout like the fourth quarter of 2020?

Willy Woo, an on-chain analyst, predicts a potential supply shock in the Bitcoin market as long-term holders continue to source BTC supply from short-term holders. Woo stated in the July 2nd newsletter that the process could pull more bitcoins out of circulation.

Pointing to the ratio of bitcoin held by the strong to the weak – also known as the bitcoin supply ratio – the analyst notes that the ratio is actively absorbing the selling pressure of fish: elephants have been shedding their crypto stocks since February.

“It reminds me of the supply shock that the market didn’t notice in the fourth quarter of 2020,” Woo wrote. “Experts are debating whether BTC is an inflation hedge in the post-COVID world, as data suggests that long-term investors are lining up BTC at a brisk pace.”

The price then went down and very quickly lost its close correlation with the stock.

New active users are increasing

Another on-chain data analytics service, Glassnode, is also promoting the booming outlook for Bitcoin adoption. The portal announced that the Bitcoin network is reaching an average of 32,000 new users per day, which is a new high for 2021.

The Bitcoin Network User Growth Index last peaked in January 2018, hitting around 40,000 before correcting down along with the price. It shows that new users will no longer have access to the Bitcoin network as the price fell from a high of $ 20,000 in January 2018 to a low of $ 3,200 in December 2020.

“This is not the structure that we are currently experiencing,” explains Woo. “New users are taking this opportunity to purchase discounted items; they come with the highest rates in 2021. “

Yet another example of on-chain data showing divergence towards price action.

Bitcoin is currently below $ 34,000 at press time, up 17.52% from its previous low of $ 28,800 on June 22nd.

Meanwhile, Petr Kozyakov, co-founder and CEO of the crypto-enabled payments network Mercuryo, believes Ethereum could steal the spotlight from Bitcoin in the short term if the London hard fork approaches.

He added, “The planned introduction of the London Hard Fork upgrade and eventual migration to Ethereum 2.0 will help restore investor confidence.” “Once the hype subsides, Bitcoin could rise to $ 50,000 in the short to medium term.” . “

Bitcoin withdrawals hit an annual high

Data analysis company CryptoQuant report As of early Tuesday, net bitcoin outflows from cash exchanges surpassed 60,000 for the first time in a year. In the meantime, the total Bitcoin deposits in the wallets of the spot exchanges fell below 20,000.

The surge in BTC payout rates over this period also shows that regulators are scrutinizing crypto trading platforms more closely. For example, the UK Financial Conduct Authority (FCA) has banned Binance – the world’s largest cryptocurrency exchange by volume – from conducting regulated activities in the country “without prior written consent.”

On Monday, Barclays told its customers, citing the FCA’s order, that they could no longer transfer funds to Binance. However, the London-based bank says customers can withdraw money from Binance to their bank accounts.

On the previous Tuesday, the People’s Bank of China also announced China took action against a local company for alleged transactions in cryptocurrencies horizontal to their usual business activities. Beijing banned all kinds of crypto-related activities in May, forcing the world’s largest crypto mining community in their regions to close or relocate operations overseas.

In general, increasing Bitcoin payout rates is seen as the intent of traders to hold the cryptocurrency rather than exchange it for other assets, including competing cryptocurrencies and Fiats. With BTC withdrawals hitting a year high overall, expectations remain higher as Bitcoin prepares for another bull run based on so-called “hodling” sentiment.

Are not. Looks like retail is back and #HODLing!

– Johan Kirsten (@ JohanKirsten1) July 6, 2021

But the total bitcoin reserves held by the exchanges have remained relatively stable since May, suggesting that the recent surge in withdrawals as of July 7th had little impact on the exchanges’ overall balance sheet.

It should be noted that exchanges’ BTC balances can vary widely based on geographic location.

For example, China-affiliated trading platforms and Chinese traders have reported a decline in their Bitcoin balances. These include Binance, where BTC reserves have dropped 7,214.97 units in the past week, and Huobi, which processed withdrawals of 4,398.63 BTC over the same period. OKEx BTC’s balance has only decreased by 1,357.53 BTC.

However, US-based Kraken has added 6,751.98 BTC to its vault in the past seven days, the highest among non-Chinese exchanges, while Coinbase’s reserves have increased 168.88 BTC.