Bitcoin exchange reserves are a good way to gauge investor sentiment in the market. It can show when investors are ready to sell, meaning that they believe the asset has hit an overvalued point. Likewise, it can show when investors are holding on to their bags and expecting the price of the digital asset to rally. The latter has been the norm going on four months now.
Since August, bitcoin exchange reserves have been plummeting with no signs of stopping. This has shown investor sentiment to be in the positive regarding the future of the asset, hence they are less willing to let go of their holdings in the market. With November and the price of BTC surging, it has not really changed the course of action as exchange reserves head towards an all-time low.
A recent report from Glassnode has shown that supply on centralized exchanges has continued to plummet in the fourth quarter of 2021. Daily withdrawals are on the rise as investors pull out their holdings on exchanges for safekeeping in private and cold storage. The report showed that daily withdrawals had hit as high as 5K BTC, an accelerated figure from the previous week.
This points to the market being in the “smart money accumulation” phase. In this phase, investors are buying up as many assets as possible and then consolidating their holdings in wait for better prices. Instead of dumping all assets in wait for the bear market, BTC being sold by investors are only so they could take strategic profits.
Demand is up despite the price of BTC hitting new all-time highs. Coins leaving exchanges at an alarming rate is leading to a supply squeeze that will most likely see the value of the digital asset go up.
One thing to keep in mind though is that the market is nearing the end of this phase. Once it passes, it is expected that the price of BTC will record some downside, although not enough to keep the market down for too long.