Bitcoin on-chain data shows the exchange reserve indicator looks different for the current selloff when compared to the May crash.
Bitcoin Spot Exchange Reserve Continues To Decline Despite The Huge Dip
As pointed out by a CryptoQuant post, the BTC reserve on spot exchanges has actually declined amidst the current price dip.
The Bitcoin all exchanges reserve is an indicator that shows the amount of coins present in wallets of all the centralized spot exchanges.
When the reserve’s value moves up, it means more investors are sending their BTC to exchanges for withdrawing to fiat or altcoin purchasing.
Similarly, a downtrend in the metric implies investors are withdrawing a net amount of Bitcoin from exchange wallets to personal ones for hodling them, or selling through OTC deals.
In the lead-up to the 2021 bull run, the exchange reserve was coming down from a very high value. This makes sense as a downtrend like that one means investors were accumulating more coins, which can help drive the price up.
Then, around when Bitcoin hit its all-time-high (ATH), the metric started climbing back up quick, indicating a selloff, and thus the price crashed in response.
The current sharp dip, however, looks different. The BTC reserve has actually been on a decline, implying investors haven’t been quick to selloff on these spot exchanges.
This would mean that this selloff may have been entirely driven by derivatives, unlike the May crash where spot exchanges also played a big role.
At the time of writing, Bitcoin’s price is around $47k, down 5% in the last 7 days. Over the past month, the cryptocurrency has accumulated 3% in gains.
Two days ago, Bitcoin saw absolute chaos in price action as the coin’s value went from $50k all the way down to $43k within the matter of fifteen minutes. And then just minutes later, BTC had already recovered above $47k.
The coin dipped back down to $44.4k yesterday, but it is already back to $47k now. It’s hard to say at the moment where the price might head next, but one thing can be expected for sure: more volatility ahead.