Bitcoin's Absorption Rate: A Bullish On-ChaiMetric Indicating Higher Future Prices
As the crypto space, analysts and investors alike are always looking for new metrics and indicators that can provide insights into market trends. One such metric that has recently caught the crypto community’s attention is Bitcoin’s yearly absorption rate on exchanges. This on-chain metric, as The Daily Hodl reported, shows signs of a bullish future for Bitcoin.
The absorption rate compares the yearly rate of exchanges’ balance change to the volume of Bitcoin mined over the same period. This metric provides a relative measure of the amount of new issuance absorbed by a particular cohort. It’s worth noting that values over 100% are possible as coins can be transferred from other investor cohorts.
James Mullarney, the host of the very popular YouTube channel “InvestAnswers,” recently released a video update to discuss this intriguing metric. Mullarney used an absorption chart from the crypto analytics firm Glassnode to illustrate his points. He informed his 446,000 YouTube subscribers that the current absorption pattern indicates “much higher prices in the future” for Bitcoin.
The absorption rate can be positive or negative. A negative absorption rate, as we’re currently seeing, means that Bitcoin is being withdrawn from exchanges at a higher rate than it’s being deposited. This net drainage is usually seen as a bullish sign as it indicates less selling pressure. It suggests that investors are holding onto their Bitcoin instead of selling it on exchanges.
The current yearly Bitcoin absorption rate for exchanges is impressive minus 100%. This is a strong indication that investors are confident in the future of Bitcoin and are choosing to hold onto their assets rather than cashing out.
At the time of writing, Bitcoin is trading at $29,940, down 0.95% in the past 24 hours.
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