Bitcoin Bearish Signal: Exchanges Observe Growing Reserves

On-chain data shows that exchanges have observed recent growth in their Bitcoin reserves, a sign that selling pressure may be increasing.

All exchanges observe growing Bitcoin reserves, except Coinbase

As one analyst in a CryptoQuant post pointed out, only Coinbase has seen any withdrawals recently. The relevant indicator here is the “exchange reserve”, which measures the total amount of Bitcoin currently held in the wallet of any centralized exchange.

When the value of this metric goes up 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 selling purposes, this trend can have bearish implications for the asset’s price.

On the other hand, a decrease in the indicator suggests that a net number of coins are leaving the exchange at the moment. When prolonged, such a trend can be a sign that investors are making withdrawals to accumulate the cryptocurrency, which can be bullish for the value of BTC in the long term.

Now, here is a chart showing the trend of the Bitcoin exchange reserves of the main platforms in the sector in the last few days:

Most of the exchanges seem to have observed an increase in their treasuries recently | Source: CryptoQuant

As shown in the graph above, the Bitcoin exchange reserve for almost all of these exchanges (Bitfinex, Binance, Kraken, Kucoin) has developed over the past few days.

The chart also shows the data for another indicator, all exchange net flow, which tells us the net change in the aggregate reserve of all exchanges in the market.

It looked like when the latest surge in the price of the cryptocurrency started, this metric saw a big spike, suggesting that holders rushed to deposit their coins to take advantage of the profit-taking opportunity.

While this positive net flow did not immediately translate into price, the continued flow of smaller deposits that have occurred in the last day or so since then appears to have had a noticeable effect on Bitcoin, as the asset has fallen below the $25,000 level now.

It is also possible that some of the earlier large deposits were made beforehand, and when the coin reached levels above $26,000, those investors pulled the trigger and dumped their holdings, hence the delay in the price decline.

However, cryptocurrency exchange Coinbase is one platform that has seen a net number of withdrawals in recent days. This suggests that possible purchases have taken place on the exchange, and indeed the Coinbase Premium Index can also confirm that.

Looks like the metric has had a very positive value in the last few days | Source: CryptoQuant

The Coinbase Premium Index measures the difference between the Bitcoin price listed on Coinbase and that on Binance. From the chart, it is clear that this indicator turned very positive recently, meaning that BTC had a higher price on Coinbase than on Binance during the peak, suggesting that the platform saw a higher degree of buying pressure.

Some of these coins bought on the exchange ahead of the price increase are now 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% in the past week.

BTC has declined after the surge | Source: BTCUSD on TradingView

Featured image from Becca at Unsplash.com, Charts from TradingView.com, CryptoQuant.com