Bitcoin Exchange Reserve Shoots Up, Pain Not Over Yet?

Keshav Verma

1 year ago

3 mins read

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On-chain data shows the Bitcoin exchange reserve has shot up during the past day, indicating that more drawdown may be coming for the price.

Bitcoin Exchange Reserve Has Registered A Large Increase

A few days back, a crash shook both Bitcoin and the wider cryptocurrency market, as the BTC price plummeted from above $29,000 to below $26,000 instantly.

In the days since then, the asset has failed to show any signs of recovery, either, as its value has only continued to move sideways, as the chart below displays.

Looks like the value of the asset has continued to consolidate around the lows | Source: BTCUSD on TradingView

Bitcoin is trading around $25,800, suggesting a decline of 11% during the past week. This weekly performance of the number one asset in the sector is worse than some of the other top coins, like Ethereum (ETH) and Cardano (ADA).

It’s currently unclear whether the asset has hit its bottom, or if more decline is on the horizon, but if on-chain data is anything to go by, the latter may be more likely. As pointed out by an analyst in a CryptoQuant post, the exchange reserve has risen during the past few hours.

The “exchange reserve” here refers to a measure of the total amount of Bitcoin currently being stored inside the wallets of all centralized exchange platforms.

When the value of this metric goes up, the investors are depositing a net amount of the asset to these platforms right now. As one of the main reasons holders may transfer their coins to the exchanges is for selling-related purposes, this trend can cause bearish implications for the cryptocurrency’s price.

On the other hand, decreases in the indicator’s value imply the holders are taking their BTC off these central entities. Such a trend may be a sign that the investors are accumulating currently, which can naturally be bullish for the cryptocurrency in the long term.

Now, here is a chart that shows the trend in the Bitcoin exchange reserve over the past week or so:

The value of the metric seems to have been going up during the past day | Source: CryptoQuant

The graph shows that the Bitcoin exchange reserve has registered a sharp uptick in the last few hours, implying that investors have been depositing big to these platforms.

The chart shows that the indicator also rose during the buildup to the crash, but the sharpness of the growth being observed this time is on another level.

In the lower graph, the quant has attached the data for the individual reserves of Coinbase and Binance, as well as for all spot and derivative platforms. It’s apparent that most of the rise has come from the derivative side of the market, with Binance seeing the largest spike.

Investors use spot exchanges for selling, so the fact that most of the deposits have been towards derivative platforms may imply that investors are just looking to open up new positions on the futures market, which can also lead to more volatility. Still, the direction of it could go either way.

Nonetheless, the spot exchange reserve has also observed a rise (although much smaller in scale), suggesting that a selloff might still be possible.

Featured image from iStock.com, charts from TradingView.com, CryptoQuant.com

Keshav Verma

Keshav is currently a senior writer at NewsBTC and has been attached to the website since June 14, 2021.

Keshav has been writing for many years, first as a hobbyist and later as a freelancer. He has experience working in a variety of niches, even fiction at one point, but the cryptocurrency industry has been the longest he has been attached to.

In terms of official educational qualifications, Keshav holds a bachelor’s degree in Physics from one of the premier institutes of India, the University of Delhi (DU). He started the degree with an aim of eventually making a career in Physics, but the onset of COVID led to a shift in plans. The virus meant that the college classes had to be delivered in the online-mode and with it came free time for him to explore other passions.

Initially only seeking to make some beer money, Keshav unexpectedly landed clients offering real projects, after which there was no looking back. Writing was something he had always enjoyed and to be able to do it for a living was like a dream come true.

Keshav completed his Physics degree in 2022 and has been focusing on his writing career since, but that doesn’t mean his passion for Physics has ended. He eventually plans to re-enter university to obtain a masters degree in the same field, but perhaps only to satiate his own interest rather than for using it as a means to find employment..

Keshav has found blockchain and its concepts fascinating ever since he started going down the rabbit-hole back in 2020. On-chain analysis in particular has been something he likes to research more about, which is why his NewsBTC pieces tend to involve it in some form.

Being of the science background, Keshav likes if concepts are clear and consistent, so he generally explains the indicators he talks about in a bit of detail so that the readers can perhaps come out having understood and learnt something new.

As for hobbies, Keshav is super into football, anime, and videogames. He enjoys football not only as a watcher, but also as a player. For games, Keshav generally tends towards enjoying singleplayer adventures, with EA FC (formerly FIFA) being the only online game he is active in. Though, perhaps due to being ultra-focused on the game, he is today a semi-pro on the EA FC scene, regularly participating in tournaments and sometimes even taking back prize money.

Because of his enthusiasm for anime and games, he also self-learned Japanese along the way to consume some of the untranslated gems out there. The skill didn’t merely remain as just a hobby, either, as he put it to productive use during his exploration for small-time gigs at the start of COVID, fulfilling a couple of Japanese-to-English translation jobs.

Keshav is also big into fitness, with agility and acceleration-related workouts making a big part of his program due to the relevance they have in football. On top of that, he also has a more traditional strength based program for the gym, which he does to maintain an overall fitness level of his body.

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