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As Bitcoin (BTC) continues trading sideways inside the $30,000$40,000 range, new data is emerging about the potential for a bullish breakout.

Willy Woo, an on-chain analyst, anticipatesa potential supply shock in the Bitcoin market, as long-term holders continued raking BTC supply from short-term ones. Woo stated in his Friday newsletter that the process might push more Bitcoin out of circulation.

The analyst referred to the ratio of Bitcoin held by strong hands versus weak hands also known as Bitcoin Supply Ratio noting that the former is actively absorbing selling pressure from whales who have been dumping their crypto holdings since February.

It reminds me of the supply shock that went by unnoticed by the market in Q4 2020, wrote Woo. Pundits were debating whether BTC was an inflation hedge in a post-COVID world when the data was pointing to long term investors stacking BTC at a fast pace.

Glassnode, another on-chain data analytics service, also boosted Bitcoins booming adoption prospects. The portal revealed that the Bitcoin network has been onboarding an average of 32,000 new users every day, which is a new high for 2021.

The Bitcoin Network User Growth metric last topped in January 2018, hitting approximately 40,000 before correcting lower alongside the prices. It showed that new users stopped coming to the Bitcoin network as its price crashed from the $20,000 top in January 2018 to as low as $3,200 in December 2020.

This is not the structure we are experiencing right now, explained Woo. New users are taking this opportunity to buy the dip; theyre coming in at the highest rate seen in 2021.

Bitcoin is currently stuck below $34,000 at publishing time, up 17.52% from its previous bottom level of $28,800 on June 22.

Meanwhile, Petr Kozyakov, co-founder and CEO of crypto-enabled payment network Mercuryo, believes that Ether (ETH) may steal the limelight from Bitcoin in the near term as the London hard fork approaches.

The proposed launch of the London Hard Fork upgrade and the ultimate migration to Ethereum 2.0 is helping to renew investors confidence, he added. Once the hype settles, Bitcoin could move up to $50,000 in the short-to-medium term perspective.

Data analytics firm CryptoQuant reported earlier Tuesday that Bitcoins net outflow transaction count from spot exchanges crossed the 60,000-mark for the first time in a year. Meanwhile, the total number of Bitcoin deposits to spot exchanges wallets decreased to below 20,000.

The BTC withdrawal rate jumped in the period that also saw regulators increasing their scrutiny over cryptocurrency trading platforms. For instance, the United Kingdom Financial Conduct Authority (FCA) hasbanned Binance the worlds largest cryptocurrency exchange by volume from operating regulated activity in the country without the prior written consent.

On Monday, Barclays notified its clients that they could no longer transfer funds to Binance, citing the FCAs order. However, the London-based bank said clients could withdraw funds from Binance to their banking accounts.

Earlier on Tuesday, the Peoples Bank of China also took action against a local company for allegedly trading cryptocurrencies on the side of their regular business activities. Beijing had effectively prohibited all kinds of cryptocurrency-related activities in May, effectively forcing the worlds largest crypto mining community in its regions to either shut down or move their operations abroad.

Generally, a run-up in Bitcoin withdrawal rates is seen as traders intention to hold the cryptocurrency instead of trading it for other assets, including rival cryptocurrencies and fiat money. Therefore, with overall BTC withdrawals hitting a one-year high, expectations remain higher as Bitcoin is preparing for another upside run on the so-called hodling sentiment.

But the total Bitcoin reserves held by exchanges have remained relatively stable since May, indicating that the latest spike in withdrawals has had little impact on the overall exchange balance as of Wednesday.

Its worth noting that exchanges BTC balances can differ greatly based on their geographical dominance.

For instance, trading platforms having association with China and Chinese traders reported declines in their Bitcoin balances. They include Binance, whose BTC reserves dropped by7,214.97units in the last week, and Huobi, which processed withdrawals of4,398.63BTC in the same timeframe. OKEx BTC balances dropped by a mere1,357.53BTC.

However, United States-based Kraken added6,751.98BTC to its vaults, the highest among the non-Chinese exchanges, in the previous seven days, while Coinbases reserves increased by 168.88 BTC.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

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Bitcoin analyst says supply shock underway as BTC withdrawal rate spikes to one-year high - Cointelegraph