Bitcoin price continues balancing act as BTC supply on exchanges hits six month low

Bitcoin liquidity continues to tighten as BTC reserves on exchanges hit a six-month low.
Analysts have identified an emerging bullish setup in the Bitcoin price chart, targeting $53,000.
Tom Lee of Fundstrat has predicted Bitcoin price could hit $200,000 as capital flows out of bonds and into crypto.

Bitcoin’s overall liquidity is shrinking as the overall BTC balance on exchanges drops. The asset’s liquidity has hit a six-month low. Proponents consider this a bullish catalyst for Bitcoin price.

Analysts predict Bitcoin price rally as liquidity tightens

Bitcoin price suffered a nearly 40% drop over the past 90 days; however, analysts believe that recent events could increase the asset’s price. Bitcoin reserves on exchanges have dropped nearly 10%, hitting a new low over the past six months.

Cryptocurrency exchanges now hold less than $100 billion in Bitcoin, nearly 12% of the asset’s market capitalization. Historically, a price rally follows the shortage of supply and liquidity tightening in Bitcoin.

Analysts have identified a key indicator that supports a bullish outlook for Bitcoin price.

Bitcoin’s price trend has formed a reverse head and shoulders pattern, viewed as an indicator that suggests a flip in the downtrend. The crypto’s price started an uptrend earlier today, posting 4% daily gains.

Analysts have set a target of $53,000 for Bitcoin price if the asset can break the neckline of the reverse head and shoulders at $44,600.

Recently, there has been a spike in active investors in the Bitcoin market. A spike in activity coupled with the supply shortage on exchanges could fuel a Bitcoin price rally.

According to crypto intelligence firm Ecoinometrics, Bitcoin’s correlation with the stock market has remained exceptionally high. Events that negatively impact the stock market could lead to a correction in Bitcoin.

US stock market prices have remained under pressure in anticipation of the Federal Reserve’s rate hike. This could negatively impact Bitcoin prices.

{4/5} The SP500 is already down 12% simply on the expectation that the Fed will do something.

If it turns out they need to do a lot more we could get a much larger correction.

That's not good for #Bitcoin. pic.twitter.com/LQJUvD804d
— ecoinometrics (@ecoinometrics) February 15, 2022

Yet institutional analysts continue to remain bullish on the flagship cryptocurrency. Tom Lee of Fundstrat, a market strategy firm, believes that Bitcoin price could hit $200,000. Lee expects US households to pull capital out of bonds and pour it into Bitcoin, as the asset hedges against inflation.

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