Bitcoin Derivatives Exchange Reserve Rising As BTC Continues To Fall


On-chain data shows that the Bitcoin reserve of derivatives exchanges has risen recently as the price of the crypto continued to fall.

Bitcoin Derivatives Exchange Reserve Observes Sharp Uptrend

As explained by an analyst in a CryptoQuant afterThe crashing BTC price may force whales and long-term holders to open short positions to hedge their portfolios.

The “derivatives reserve” is an indicator that measures the total amount of Bitcoin currently present on portfolios of all derivatives exchanges.

When the value of this metric increases, it means that coins are currently entering derivatives exchanges. Such a trend could mean that investors are currently opening leveraged positions, which could result in higher volatility in the value of the crypto.

On the other hand, a downward trend in the indicator implies that investors are currently withdrawing their coins from these exchanges.

Here is a chart showing the trend in Bitcoin Derivatives Exchange Reserve over the past year:

The statistic’s EMA 7 value seems to have recently seen an uptrend | Source: CryptoQuant

As you can see in the chart above, Bitcoin’s derivatives reserve had been on the decline for a while, until recently when the indicator’s value started rising again.

Recent data suggests that the crash in the price of the coin has pushed about 50% of the total BTC supply into a loss. Based on this, many long-term keepers and whales will certainly be underwater at this time as well.

Related literature | Bitcoin Breaks the $19K Level – Will the Sell Continue? What’s the next bottom?

The figure believes the surge in derivatives reserve is due to these long-term holders and whales panicking over the loss of their portfolios.

These holders want to hedge their portfolios and reduce risk by opening short positions on derivatives exchanges.

However, the analyst points out that such aggressive shorting would create even more selling pressure, pushing the price further down.

Related literature | Long-term Bitcoin Holders Now Own Nearly 80% of Realized Cap

But out of this situation also emerges another possibility, and that would be a huge short squeeze. There will have to be a lot of demand and a sudden flip in the price of Bitcoin before such an event can take place.

The quant thinks it could take more time and further decline in the value of the crypto before the right conditions are aligned for it.

BTC price

At the time of writing, Bitcoin’s price is hovering around $19.3k, down 29% over the past seven days. In the past month, the crypto has lost 33% in value.

It seems that BTC’s value has recovered a bit after a dip below $18k | Source: BTCUSD on TradingView
Featured image from Unsplash.com, Charts from TradingView.com, CryptoQuant.com

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