On-chain data shows that the Bitcoin exchange reserve has lost another 50k BTC in the past week, a sign that could be bullish for the price of the crypto.
Bitcoin Exchange Reserve Continues to See Further Decline in Recent Weeks
As noted by an analyst in a CryptoQuant after50k BTC in net outflows has left the exchange portfolios in the past week.
The “reserve for all exchanges” is an indicator that measures the total amount of Bitcoin stored in wallets of all centralized exchanges.
When the value of this metric increases, it means that the supply on exchanges increases as investors deposit a net amount of coins. Such a trend could be bearish for the price of the coin as holders usually switch to exchanges for selling purposes.
On the other hand, the decreasing value of the reserve implies that there is currently a net amount of Bitcoin coming out of the exchange portfolios. This kind of trend, when sustained for a period of time, can turn out to be bullish for the price of the coin as it can be a sign that investors are piling up.
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Here is a chart showing the trend in BTC exchange reserve over the past few months:
It seems that the value of the indicator has fallen sharply lately | Source: CryptoQuant
As you can see in the chart above, the Bitcoin exchange reserve has been falling in recent months. In the past week alone, the 50k BTC stat has fallen in value. The last few days have seen major downward spikes of around 10k to 11k BTC in particular.
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The exchange reserve is traditionally considered to be the “sale offer” of the currency. Since it has been contracting for a while, the effect on the price should be positive due to the dynamics of supply and demand.
Some have referred to this drop as creating a “supply shock” in the market. However, recent data suggests that the reserve is no longer the main source of selling pressure, but that coins coming out of exchanges have simply shifted into investment vehicles such as ETFs.
Nevertheless, the diminishing reserve reduces some of the sales supply, so the net effect of such a trend could still be bullish.
BTC price
At the time of writing, Bitcoin price is hovering around $41k, up 5% over the past week. In the past month, the crypto has lost 6% in value.
The chart below shows the trend in the price of the coin over the past five days.
Bitcoin price seems to have risen in recent days | Source: BTCUSD on TradingView
Featured image from Unsplash.com, Charts from TradingView.com, CryptoQuant.com