On-chain data shows that Bitcoin has continued to leave exchanges’ wallets recently, suggesting that the asset’s price could be bullish.
Bitcoin’s exchange reserve has recorded a significant decline recently
As analyst Ali Martinez explained in New mail On X, exchanges have seen a massive amount of Bitcoin leaving over the past few months. The on-chain suitability metric here is “exchange reserve,” which tracks the total number of tokens currently in the wallets of all centralized exchanges.
When the value of this measure rises, investors will place net deposits in these platforms for the time being. Since one of the main reasons coin holders may transfer their coins to exchanges is for selling purposes, this trend could be downward for the price of the asset.
On the other hand, an indicator recording a decline indicates that users are transferring a net amount of BTC from wallets linked to exchanges. This could be a potential sign of investors wanting to hold onto their coins for the long term, which could naturally be bullish for the cryptocurrency.
Now, here’s a chart showing the trend in Bitcoin Exchange Reserve over the past year:
The value of the metric appears to have been going down over the last few months | Source: @ali_charts on X
As the chart above shows, Bitcoin exchange reserves have been on a steady downward trend since the beginning of the year, indicating that investors have been continuously depleting supply on these platforms.
More specifically, the value of the index has fallen by 400,000 BTC over the past eight months, equivalent to more than $27 billion at the cryptocurrency’s current exchange rate.
Continued withdrawals from these platforms can be a positive sign for the asset if investors accumulate them. However, there may be another reason behind this trend.
The chart shows that outflows from exchanges began around the time exchange-traded funds (ETFs) received SEC approval.
Spot ETFs provide an alternative way to gain exposure to Bitcoin price movements in a way that is familiar to traditional investors. Traders who do not want to deal with cryptocurrency wallets and exchanges may prefer to invest in the asset through these financial instruments.
As such, the long-term decline experienced by the exchange reserve could represent the market shift brought about by the emergence of spot ETFs.
Bitcoin price
At the time of writing, Bitcoin is trading at around $68,000, up more than 9% over the past seven days.
Looks like the price of the coin has been rising recently | Source: BTCUSDT on TradingView
Featured image by Dall-E, CryptoQuant.com, chart from TradingView.com
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