Bitcoin was mostly flat on Tuesday, trading just above $29,000 as on-chain data suggests longer-term holders are moving coins to cold storage.

The world's largest cryptocurrency by market capitalization has stayed within a narrow range between around $29,000 and $31,500 for over a month now. It's price rose 0.4% over the past 24 hours to trade at $29,259 at 3:21 p.m. in New York, according to CoinGecko. 

"Bitcoin exchange balances have seen a substantial decline, reaching levels last seen in January 2018 as traditional fund investors have demonstrated a renewed interest in the digital asset, contributing to the largest consecutive inflows into crypto-backed investment funds since the final quarter of 2021," Bitfinex said in its weekly report.

Bitcoin exchange balances declining

"From its peak in March 2020, bitcoin exchange balances have declined by about 32 percent. While some of this decline may be attributed to the usage of alternatives such as decentralized exchanges, this is also a testament of how longer-term holders are moving coins to cold storage," the Bitfinex Alpha report added.

The report's authors said the decline in exchange reserves is positive for bitcoin's price as more investors indicate the desire to accumulate rather than trade.

"Crypto-backed investment funds also saw a net inflow of $137 million last week, with 99% of this sum directed towards bitcoin-backed funds. The sustained inflows into bitcoin-backed funds indicate a strong investor confidence in the asset, despite the volatility inherent in the crypto market," the report added.

Macroeconomic headwinds

On Wednesday, the Federal Open Market Committee will announce its next rate decision, with analysts expecting a hike of 25 basis points to bring its target range to 5.25-5.50%. On Thursday, the ECB is expected to raise rates by 25 basis points to 4.25%.

Bitcoin tends to show weakness in the lead up to rate announcements as investors de-risk, especially if a hawkish move is anticipated. Close attention will be given to the wording of the Fed's post-rate decision statement, and bitcoin's consolidation around the $29,000 mark might face downside pressure should hawkish sentiments persist.