Bitcoin Exchange Reserve Has Now Reached Equilibrium After 2 Years Downtrend


On-chain data shows that the percentage of Bitcoin supply on exchanges appears to have leveled off in recent months, ending an overall downward trend that lasted about two years.

Bitcoin Exchange Reserve Begins to Move Sideways as Inflows and Outflows Balance

According to the latest weekly report from glass nodeThe percentage of total BTC supply on exchanges seems to have recently ended the decline and is now moving sideways.

The “exchange reserve” is an indicator that measures the total amount of Bitcoin stored in wallets of all exchanges.

When the value of this metric rises, it means that exchanges are currently observing net inflows. Such a trend could be bearish for the price of the coin as it represents an increase in the crypto’s sales supply.

On the other hand, when the value of the reserve falls, it means that the outflow is overwhelming the inflow at the moment. This trend could turn out to be bullish for Bitcoin’s value as it could be a sign of holder accumulation.

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Here’s a chart showing how the percentage of the total supply represented by the exchange reserve has changed over the past few years:

It seems that the indicator’s value has shifted sideways recently | Source: Glassnode’s The Week Onchain – Week 10, 2022

As you can see from the chart above, the stat hit a record high in March 2020, after which the percentage of Bitcoin supply on exchanges declined steadily until May 2021, where there was a brief rise due to the sell-off that month.

Shortly afterwards, the indicator resumed its downward trend, but after September 2021, the statistic has largely been sideways consolidated.

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This means that at the current value of the foreign exchange reserve, an equilibrium has been established between the inflows and the outflows.

The sideways trend is interesting because while Bitcoin’s price has struggled lately and macro uncertainties like the Russo-Ukrainian war are looming over the market, there is no significant rise in the indicator.

Usually a big sell-off occurs during periods like now, but since the stat is still going sideways, that means there’s still enough demand (i.e. outflows) to counter any inflows. This trend could be bullish for the price of Bitcoin.

BTC price

At the time of writing, Bitcoin’s price is hovering around $38.7k, down 13% from the past week.

The price of BTC seems to have shown less volatility since the plunge a few days ago | Source: BTCUSD on TradingView
Featured image from Unsplash.com, Charts from TradingView.com, Glassnode.com

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