A net $368-million of Bitcoin was sent to personal wallets in the week through to 4 April, a period that saw this year’s second-largest net Bitcoin outflow from crypto exchanges, strategists Alkesh Shah and Andrew Moss wrote in a note.

“Investors transfer tokens from exchange wallets to their personal wallets when they intend to hold them (or HODL), indicating a potential decrease in sell pressure,” they said. The acronym “HODL” is a crypto-sector meme referring to the idea of holding onto tokens for the long term.

Concerns stemming from the US regulatory crackdown on digital-asset platforms may have triggered the efflux from exchanges, the BofA strategists wrote in a note published on Monday.

Bitcoin’s year-to-date surge has outstripped major asset classes and sparked a thorny debate on why the largest token is rebounding from a rout in 2022. 

Some analysts argue expectations of eventual Federal Reserve interest-rate cuts are bolstering riskier investments like crypto. Other theories — often disputed — include the coin’s alleged ability to skirt stress in the banking sector or its potential to hedge inflation as a kind of digital gold.

Big week

Bitcoin this week climbed above $30,000 for the first time since June 2022. The token is up more than 80% since 31 December, beating the Nasdaq 100 tech index’s 19% gain. Gold has climbed roughly 9%.

Digital tokens have jumped in 2023 despite aggressive actions by US regulators after the downfall of FTX and other crypto outfits. The rally has come amid a drop in crypto market liquidity and trading volumes following the bankruptcies.

“I am looking for Bitcoin to move toward the $33,000 level before any meaningful technical correction takes place,” said Nathan Batchelor, managing partner at analytics platform Biyond Trader. “Bitcoin has stopped reacting to bad news. This is a tell-tale sign of a strong buyers’ market.”

Traders are awaiting another signal to confirm Bitcoin’s breakout, according to Garry Krugljakow, founder of 0VIX, an open-source protocol for lending and borrowing in blockchain-based decentralised finance, or DeFi. 

Inflation print

He added that economic data due this week could provide that cue, particularly Wednesday’s US consumer price index. The median estimate in a Bloomberg News survey calls for a 5.1% jump in March from a year earlier.

“Anything below 5.2% or around 5.2% could lead to a bullish continuation for” Bitcoin, Krugljakow said. “5.3% or higher will most likely give a slight shock and dampen the current price action.”

In contrast to Bitcoin, the net inflow of Ether to crypto exchanges in the week through April 4 was the largest of 2023, according to BofA. That’s ahead of the Ethereum blockchain’s biggest software upgrade since last year’s Merge. 

The so-called Shanghai upgrade is the culmination of years-long work that changes the way Ethereum operates. While BofA strategists do not expect the event to directly drive selling pressure, they do foresee heightened volatility around the shift in part due to decreased liquidity, exchange inflows and derivatives activity.

Ether, the largest token after Bitcoin, is up about 55% so far this year, roughly in line with a gauge of the top 100 digital assets. Ether slipped 1.7% to $1,863 as of 11.20am in Tokyo on Wednesday, while Bitcoin shed less than 1% to hover around $30,000. BM/DM