The number of bitcoin on-chain deposits has dropped sharply over the last six months, indicating a strong optimistic or “HODLing,” sentiment in the market. 

The seven-day average of the number of transfers to exchange addresses, or unique daily exchange deposits, fell to 23,986 on Jan. 1. That’s the lowest level since November 2016 and comes after topping out at 58,925 at the end of June 2019, according to crypto analytics firm Glassnode. The number has since inched up to 27,289 as of Feb. 4.

Notably, the count of deposits dropped by 60 percent in the second half of 2019 even as prices collapsed from $13,800 to $6,425. 

During violent price drops, investors usually move their coins to exchanges to sell them in the market. However, investors held onto their coins during the second half of 2019 despite the price slide. 

It indicates increased “HODLing,” a sign of strengthening belief in the long-term viability of the cryptocurrency, according to Ashish Singhal, CEO and co-founder at CRUXPay and CoinSwitch.co. 

“HODLers are not in it for a ‘get rich quick’ mentality and are now less fazed by micro factors that previously led to an exodus or panic sell,” Singhal told CoinDesk. 

Nicholas Pelecanos, advisor to NEM Ventures, sees the slowdown in trading and on-chain transaction volumes as indicative of a not-so-healthy market in the short-term.

“A divergence between on-chain transaction volume and price appreciation has typically been a bearish signal,” Pelecanos told CoinDesk.  

Bitcoin’s price rallied by 30 percent in January, diverging higher from the the count of transfers to exchange addresses, which remained near multi-year lows hit on Jan. 1.

Although the number of transfers to exchanges declined, the number of transactions recently saw an upswing along with price. The seven-day average of transactions jumped rose from 290,200 on Jan. 6 to a three-month high of 324,745 on Feb. 3.

That investors hoarded coins in January amid a price rally suggests strong bullish sentiment among investors; if they had doubted the sustainability of the recent price gains, they would have moved their coins to exchanges to sell them at market price, leading to a rise in exchange deposits. 

Bitcoin will undergo mining reward halving in May 2020. The process aims to curb inflation by reducing rewards per block mined by 50 percent. When it occurs, the block rewards will drop to 6.25 BTC from the current 12.5 BTC. 

Bitcoin has picked up a bid ahead of the supply-cutting event. The cryptocurrency is currently trading at $9,400, representing a 46 percent gain on December’s low of $6,425. 

Connor Abendschein, crypto research analyst at Digital Assets Data, expects exchange deposits to rise should the price of the cryptocurrency continue to do so ahead of the halving and in the following months. That’s because some investors may decide to book profits, he said.