On-chain data shows that the Bitcoin exchange reserve has increased over the past day, indicating that more money may fall.
Bitcoin Exchange Reserve has registered a major increase
A few days ago, a crash shook both Bitcoin and the wider cryptocurrency market, as the BTC price instantly plummeted from above $29,000 to below $26,000.
In the days since, the asset has also shown no sign of recovery as the value just kept moving sideways, as the chart below shows.
Looks like the value of the asset has continued to consolidate around the lows | Source: BTCUSD on TradingView
Bitcoin is trading near $25,800, indicating an 11% drop over the past week. This weekly performance of the number one asset in the industry is worse than some of the other top coins, such as Ethereum (ETH) and Cardano (ADA).
It is currently unclear if the value has bottomed out, or if further declines are in the offing, but if we can rely on on-chain data, the latter may be more likely. As noted by an analyst in a CryptoQuant afterthe foreign exchange reserve has risen in recent hours.
The “exchange reserve” here refers to a measure of the total amount of Bitcoin currently stored in the wallets of all centralized exchange platforms.
When the value of this measure rises, the investors are currently depositing a net amount of the assets on these platforms. Since one of the main reasons why holders may transfer their coins to the exchanges is sales-related purposes, this trend could have bearish consequences for the price of the cryptocurrency.
On the other hand, a fall in the value of the indicator implies that the holders are moving their BTC away from these central entities. Such a trend could be a sign that investors are currently accumulating, which could obviously be bullish for the cryptocurrency in the long run.
Here is a chart showing 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 chart shows that the Bitcoin exchange reserve has registered a sharp increase in the past few hours, implying that investors have been depositing large amounts of money on these platforms.
The chart shows that the indicator also rose during the run-up to the crash, but the sharpness of the growth observed this time is on a different level.
In the bottom chart, the quant has attached data for Coinbase and Binance individual reserves, as well as all spot and derivatives platforms. It is clear that most of the increase has come from the derivatives side of the market, with Binance seeing the biggest spike.
Investors use spot exchanges to sell, so the fact that most deposits have gone to derivatives platforms may imply that investors just want to open new positions on the futures market, which can also lead to more volatility. Still, the direction can go either way.
Nevertheless, the spot exchange reserve has also seen an increase (albeit on a much smaller scale), suggesting that a sell-off could still be possible.
Featured image from iStock.com, charts from TradingView.com, CryptoQuant.com