Exchanges close Q3 with massive Bitcoin outflows, why a rally is on the way

The third quarter of 2022 was a rollercoaster ride for the price of bitcoin. BTC’s price had fluctuated wildly during this time and ended up hitting lower lows than expected. However, this has not changed investors’ beliefs about the cryptocurrency. As the third quarter drew to a close, there had been a massive withdrawal party from centralized exchanges, leading to more than $600 million in outflows.

Bitcoin outflows are growing

The last day of September has proven to be an important trading day for bitcoin. Given that it was both the last day of the month and a Friday, which means the end of the trading week, bitcoin investors seemed to have taken this as a sign to move their BTC off exchanges.

Data shows that on this last day, investors moved 34,723 BTC out of centralized exchanges. This came out to Rond $668.07 million at the time of the withdrawals. It also follows the accumulation trend that has accelerated since mid-September. This happened while the digital asset was trending below $20,000, and it is now clear that this accumulation trend had been behind the brief peak above $20,000 on Friday.

More than 34k BTC leaves exchanges in one day | Source: Santiment

On-chain data aggregator Santiment notes that this is the fourth largest daily BTC outflow on record for the digital asset in 2022. Additionally, it is also a new 3-month record for the digital asset. Part of a major “bank run” that has seen BTC held by centralized exchanges fall by more than 60,000 over the weekend.

Could this trigger an outbreak?

For bitcoin, such large removal of BTC from centralized exchanges is always a bullish indicator. Investors tend to do this when their long-term conviction is high and they want to protect their coins while holding out for the future since it is widely known that “not your keys, not your coins.”

What this does is remove a significant supply of bitcoin from the open market, leading to a supply squeeze. Demand has also been increasing for the digital asset, which means that the buying pressure is increasing. Santiment also notes in his post that the last time the digital asset had seen such a massive movement of coins from exchanges, BTC’s price had risen more than 22% in the following month.

BTC settles above $19,000 | Source: BTCUSD on TradingView.com

Interestingly, October has always been a historically bullish month for BTC and the general crypto market. This means that a rally from this current level could see the price of bitcoin reach $23,000 in the next 4 weeks. However, it is also important to remember that the worst of the bear market is not over. So, while a breakout is possible, it will be difficult for bitcoin to sustain such high levels, and a downward correction could lead to new lows.

Bitcoin is trading at $19,189 at the time of writing. This puts it 10% below the 50-day moving average of $21,234. The next significant point of resistance lies at $19,900, while the digital asset finds increasing support at $19,050.

Featured image from CryptoSlate, chart from TradingView.com

follow Best Owie on Twitter for market insights, updates and the occasional funny tweet…