Bitcoin Exchange Reserves Drop to Multi-Year Low of 2.46 Million BTC
Data from CryptoQuant reveals that Bitcoin (BTC) reserves on cryptocurrency exchanges have reached a multi-year low, coinciding with the ongoing bull market as BTC approaches the $100,000 mark. This decline may significantly impact the asset's supply-demand dynamics.
Investor Confidence Increasing In Bitcoin?
Typically, during a bull market, Bitcoin reserves on exchanges rise as long-term holders (LTH) and short-term holders (STH) transfer assets to trading platforms for profit-taking. However, the current bull market is reversing this trend, showing a decrease in BTC exchange reserves.
Data from CryptoQuant indicates over 171,000 BTC have been withdrawn from exchanges since pro-crypto Republican candidate Donald Trump won the November US presidential election. The substantial withdrawals suggest holders are moving their assets to cold wallets, indicating long-term confidence in BTC.
BTC exchange reserves sharply declined from 3.33 million BTC on November 5, 2022, to 2.93 million BTC by December 21, 2022.
A notable decline began in February 2024, likely in anticipation of the Bitcoin halving scheduled for April. During this period, reserves fell from 3.05 million BTC to 2.63 million BTC by October 30, marking a 13.77% decrease over eight months.
Current exchange reserves stand at 2.46 million BTC, the lowest level in years. This trend suggests a potential supply crunch for Bitcoin, which could lead to upward price pressure in the coming months.
BTC Illiquid Supply Continues To Grow
Supporting the long-term holding narrative, Glassnode’s illiquid supply metric shows an increase of 185,000 BTC in the past 30 days.
The illiquid supply now totals approximately 14.8 million BTC, representing nearly three-fourths of the current circulating supply of 19.8 million BTC. Continued growth in illiquid supply could lead to significant price surges due to supply scarcity, although it may also introduce increased volatility.
While the decline in exchange reserves and rising illiquid supply are long-term bullish indicators for Bitcoin, short-term price movements may face corrections. Analyst Ali Martinez notes that BTC has formed a head-and-shoulder pattern on the hourly chart, potentially leading to a sell-off that could push prices to $90,000.
Conversely, analyst Rekt Capital states that after touching $98,000, BTC has entered a parabolic phase of its rally. As of the latest report, BTC trades at $94,968, reflecting a 1.4% decrease in the past 24 hours.
