Sharply Dropping Bitcoin Reserves May Suggest Return To Bullish Trend

On-chain data shows Bitcoin exchange reserves have sharply dropped recently, suggesting a possible return to bullish trend.

Bitcoin Exchange Reserves Historical Data May Tell Current Trend Is Bullish

As explained by an analyst in a CryptoQuant post, the Bitcoin exchange reserves seem to have sharply fallen in the past couple of weeks.

The “all exchanges reserve” is a BTC indicator that shows the total amount of coins currently stored in exchange wallets.

When the value of this indicator moves up, it means investors are depositing their Bitcoin to exchanges. Holders usually transfer coins to exchanges either for withdrawing to fiat or for purchasing altcoins with them. As such, this trend can be bearish for the price of the crypto.

On the other hand, when the reserve moves down, it implies holders are withdrawing their coins at the moment. Such a trend, if sustained, can prove to be bullish for BTC as it may mean that investors are currently in a state of accumulation.

Related Reading | Bitcoin Drops To $46k As $44.2 Million In BTC Gets Dumped Within 1 Min

Now, here is a chart that shows the trend in the value of the Bitcoin exchange reserve over the past six months:

BTC exchange reserves seem to be moving down since a while now | Source: CryptoQuant

The Bitcoin exchange reserve has been trending down since May, which would suggest that the market is currently accumulating the crypto.

As you can see in the above graph, the analyst has highlighted the two types of trend the different parts of the indicator’s curve have seemed to follow during this period.

Related Reading | Is MicroStrategy Considering Lending Their Bitcoin To Generate Yield? WHY?

It looks like a gradual decline of the reserve has usually marked peak formation in the price of the coin. While a sharp drop seems to correlate with upwards trend.

Clearly, the current trend looks to be one of a sharp drop, and so the quant believes that the coming weeks might be bullish for Bitcoin.

BTC Price

At the time of writing, Bitcoin’s price floats around $46k, down 4% in the last seven days. Over the past month, the coin has lost 21% in value.

The below chart shows the trend in the price of BTC over the last five days.

Bitcoin Price Chart

BTC's price has been moving on a downward trajectory in the past few days | Source: BTCUSD on TradingView

Bitcoin has been in consolidation for a while now as the price of the coin stagnates in the $45k to $50k range. Currently, it’s unclear when the coin might break out of this sideways movement, but if the exchange reserves are anything to go by, the long-term outlook might be bullish for BTC.

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