On-chain data shows that exchanges have seen recent growth in their bitcoin reserves, a sign that selling pressure may be increasing.
All exchanges are seeing growing bitcoin reserves except for Coinbase
As one analyst pointed out in a CryptoQuant post, only Coinbase has seen some withdrawals lately. The relevant indicator here is the “Exchange Reserve”, which measures the total amount of Bitcoin currently held in the wallets of a centralized exchange.
When the value of this metric increases for an exchange, it means that the platform is receiving a net amount of deposits right now. Since one of the main reasons investors transfer their coins to exchanges is for sale purposes, this trend can have bearish consequences for the asset’s price.
On the other hand, a drop in the indicator means that a net number of coins are currently exiting the exchange. If sustained, such a trend can be a sign that investors are making withdrawals to accumulate the cryptocurrency, which can be bullish for BTC’s value in the long term.
Now here is a chart showing the development of the Bitcoin exchange reserves of the major platforms in the industry over the past few days:
Most exchanges seem to have seen their Treasuries rising lately | Source: CryptoQuant
As shown in the chart above, the bitcoin exchange reserve for almost all of these exchanges (Bitfinex, Binance, Kraken, Kucoin) has trended upwards over the past few days.
The chart also shows the data for another indicator, the Net Flow of All Exchanges, which informs us of the net change in the combined reserve of all exchanges in the market.
It looked like this metric saw a big surge at the start of the cryptocurrency’s price recent surge, suggesting that holders were rushing to deposit their coins for a possible profit-taking opportunity.
While this net positive flow didn’t impact the price immediately, the continued flow of smaller deposits that have occurred over the past few days or so since appears to have had a noticeable effect on Bitcoin as the asset plunged below the $25,000 mark Now.
It’s also possible that some of the earlier large deposits were made upfront, and when the coin hit levels above $26,000, these investors pulled the trigger and dumped their holdings, hence the delay in the price drop.
However, cryptocurrency exchange Coinbase is one platform that has seen net withdrawals over the past few days. This suggests that possible buying has been taking place on the exchange, and the Coinbase Premium Index may actually confirm this as well.
Looks like the metric has been very positive for the past few days | Source: CryptoQuant
The Coinbase Premium Index measures the difference between the bitcoin price listed on Coinbase and that on Binance. As can be seen from the chart, this indicator has turned very positive recently, meaning that BTC was priced higher on Coinbase than on Binance during the surge, suggesting that the platform was seeing more buying pressure.
Some of these coins that were bought on the exchange before the price surge are now being withdrawn from the platform’s wallets, hence the downward trend in the currency reserve.
BTC price
At the time of writing, Bitcoin is trading around $24,200, up 10% over the past week.
BTC has declined after the surge | Source: BTCUSD on TradingView
Featured image of Becca on Unsplash.com, charts by TradingView.com, CryptoQuant.com
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