Bitcoin’s weekend ascent has run out of steam even though blockchain data and weakness in the U.S. dollar indicate the path of least resistance is to the higher side.
The top cryptocurrency by market value is trading near $34,200 at press time, representing a 3% drop on the day, CoinDesk 20 data show.
The pullback has reversed a significant chunk of the bounce from $32,700 to $36,000 seen in the past three days. It comes amid a decline in the number of coins held on exchanges, a bullish development.
Balance held on centralized exchanges fell to 2.577 million BTC on Sunday, hitting the lowest level since May 16, according to data tracked by Glassnode.
The tally has dropped by more than 25,000 BTC in two weeks, meaning fewer bitcoins are now available for sale compared with the second half of June. Investors typically take direct custody of their bitcoins when expecting a price rise or aiming to generate an extra yield by tokenizing the cryptocurrency on Ethereum’s blockchain.
Furthermore, that’s not the only sign wealthy investors are stepping up their bargain hunting. So the odds appear stacked in favor of bulls – especially as the dollar is trading weak in the currency markets despite Friday’s upbeat U.S. employment data.
Bitcoin has mostly moved in the opposite direction to the dollar index (DXY) since the Federal Reserve surprised markets with its early interest-rate hike forecast on June 16. Rate increases make fiat currencies attractive and dilute the appeal of inflation hedges like bitcoin and gold.
The DXY, which tracks the greenback’s value against major currencies, is currently at 92.14, down 0.6% from Friday’s four-month high of 92.74, according to TradingView data.
The greenback may suffer a more profound drop if the minutes of the Fed’s June meeting, scheduled for release later this week, downplay rate-hike prospects.
“Given that the individual forecasts of Federal Reserve officials were not discussed at last month’s FOMC meeting, and Chair Powell played them down, it ought not to be surprising if the minutes were not as hawkish as the [interest rate] dots,” Marc Chandler, chief market strategist at Bannockburn Global Forex, said in a blog post published on Sunday.