On-chain data shows the percentage of Bitcoin supply on exchanges seems to have plateaued over the past few months, ending an overall downtrend that lasted about two years.
Bitcoin Exchange Reserve Starts Moving Sideways As Inflow And Outflows Attain Equilibrium
As per the latest weekly report from Glassnode, the percentage of the total BTC supply on exchanges looks to have ended its decline recently and is now moving sideways.
The “exchange reserve” is an indicator that measures the total amount of Bitcoin stored in wallets of all exchanges.
When the value of this metric rises, it means exchanges are observing net inflows right now. Such a trend can be bearish for the price of the coin as it represents an increase in the sell supply of the crypto.
On the other hand, when the reserve’s value decreases, it implies outflows are overwhelming the inflows at the moment. This trend may turn out to be bullish for the value of Bitcoin as it may be a sign of accumulation from holders.
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Now, here is a chart that shows how the percentage of the total supply that the exchange reserve accounts for has changed over the past couple of years:
Looks like the value of the indicator seems to have moved sideways recently | Source: Glassnode's The Week Onchain - Week 10, 2022
As you can see in the above graph, the metric had an all-time high back in March 2020, following which the percentage of the Bitcoin supply on exchanges went on a constant decline until May 2021, where there was a brief increase due to the selloff that month.
Soon after, the indicator did resume the downtrend, but following September 2021 the metric has mostly consolidated sideways.
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This means that at the current value of the exchange reserve, an equilibrium between the inflows and the outflows has been established.
The sideways trend is interesting since while the price of Bitcoin has struggled recently and macro uncertainties like the Russian-Ukraine war are looming over the market, there has been no significant increase in the indicator.
Usually, a large selloff occurs during periods as now, but as the metric still continues to go sideways, it means there has still been enough demand (that is, outflows) to counteract any inflows. This trend may be bullish for the price of Bitcoin.
At the time of writing, Bitcoin’s price floats around $38.7k, down 13% in the past week.
BTC's price seems to have shown lesser volatility since the plunge a few days back | Source: BTCUSD on TradingView
Featured image from Unsplash.com, charts from TradingView.com, Glassnode.com