Exchange Reserve Loses Another 50k BTC Over Past Week

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On-chain data shows the Bit­coin exchange reserve has lost anoth­er 50k BTC over the past week, a sign that could be bull­ish for the price of the crypto.

Bitcoin Exchange Reserve Continues To Observe Further Decline In Recent Weeks

As point­ed out by an ana­lyst in a Cryp­to­Quant post, 50k BTC in net out­flows has exit­ed exchange wal­lets over the past week.

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

When the val­ue of this met­ric goes up, it means the sup­ply on exchanges is ris­ing as investors deposit a net amount of coins. Such a trend may be bear­ish for the price of the coin as hold­ers usu­al­ly trans­fer to exchanges for sell­ing purposes.

On the oth­er hand, the reserve’s val­ue decreas­ing implies that a net amount of Bit­coin is exit­ing exchange wal­lets at the moment. This kind of trend when sus­tained over a peri­od can prove to be bull­ish for the coin’s price as it may be a sign that investors are accumulating.

Relat­ed Read­ing | Cur­rent Stretch Of Bit­coin Fear Sur­pass­es 2021 Selloff

Now, here is a chart that shows the trend in the BTC exchange reserve over the past few months:

Bitcoin Exchange Reserve

Looks like the value of the indicator has sharply gone down recently | Source: CryptoQuant

As you can see in the above graph, the Bit­coin exchange reserve has been going down over the last few months. In the past week alone, the met­ric has dropped 50k BTC in val­ue. The last cou­ple of days espe­cial­ly saw large down­ward spikes amount­ing to around 10k to 11k BTC.

Relat­ed Read­ing | Mike Novo­gratz: Bit­coin Price To Range Between $30k-$50k Through­out The Year

The exchange reserve has tra­di­tion­al­ly been con­sid­ered the “sell­ing sup­ply” of the coin. As it has been shrink­ing for a while now, the effect on the price should be pos­i­tive due to sup­ply-demand dynamics.

Some have referred to this decline as cre­at­ing a “sup­ply shock” in the mar­ket. How­ev­er, recent data sug­gests that the reserve is no longer the main source of sell­ing pres­sure, coins exit­ing from exchanges have instead just shift­ed into invest­ment vehi­cles like ETFs.

Nonethe­less, the reserve declin­ing does reduce part of the sell­ing sup­ply so the net effect of such a trend may still be bullish.

BTC Price

At the time of writ­ing, Bitcoin’s price floats around $41k, up 5% in the past week. Over the last month, the cryp­to has lost 6% in value.

The below chart shows the trend in the price of the coin over the past five days.

Bitcoin Price Chart

The price of Bitcoin seems to have seen a surge over the last couple of days | Source: BTCUSD on TradingView
Featured image from Unsplash.com, charts from TradingView.com, CryptoQuant.com

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