Bitcoin exchange reserves hit two-year low, but analysts disagree on why

As Bitcoin price approaches $68,000, on-chain indicators show that several favorable fundamentals are working in Bitcoin's favor.

Exchanges have less than 2.7 million BTC in Bitcoin reserves, the lowest on record, down from more than 3.3 million BTC about three years ago, according to data from CryptoQuant.

But before we do that, there are a few caveats about the data. It is unclear how long ago Bitcoin reserves were at their current levels, as they only go back to mid-October 2021. The latest indicators available are from mid-September. CoinMarketCap Research Leader Alice Liu explained: decryption This is a data-sharing industry initiative that was introduced late after the collapse of cryptocurrency exchange FTX.

In other words, this is a feature, not a bug.

There are several factors that can affect the level. Bitcoin Regarding exchange. The administrator overseeing Mt Gox's assets has announced that the distribution of remaining funds to creditors will be further delayed, extending the deadline by one year to October 31, 2025. Mt.Gox, once one of the world's largest cryptocurrency exchanges, collapsed in 2014 following a massive hack. Although some creditors have been repaid, wallets associated with the estate still hold 44,905 BTC worth about $3 billion, according to on-chain data analysis firm Arkham Intelligence.

Another initiative that is impacting the available supply of Bitcoin is Babylon, a Bitcoin staking protocol that was recently relaunched for additional BTC deposits and has amassed approximately $1.4 billion in coins. Masu. Babylon aims to add utility to Bitcoin by launching a proof-of-stake marketplace that allows third-party protocols to utilize Bitcoin for security.

Mr. Liu said: decryption “When an exchange's Bitcoin reserves decrease, it usually signals a change in investor sentiment.” ” he pointed out.

This could also reduce the supply of coins for trading, which could result in some volatility in the market, he added.

“Historically, in previous market cycles, the decline in foreign exchange reserves has been closely associated with retail investors adopting long-term holding strategies,” Liu said.

He further explained that keeping assets in cold storage off-exchange “reduces the possibility of impulsive sales and further strengthens the view that investors can commit to holding for the long term.”

Liu also pointed out that in the past, the trend of withdrawing Bitcoin from exchanges was driven by individual participants, but in this cycle, institutional investors are playing a larger role.

“Investors are once again pulling Bitcoin from exchanges, which could signal the beginning of an accumulation phase in the current market cycle,” he said.

Shubh Varma, co-founder and CEO of Hyblock Capital, said: decryption “Bitcoin foreign exchange reserves are indeed reaching historic lows, but the general interpretation of this trend requires a more nuanced approach.” The increase in open interest has been coupled with a “significant increase in purchasing pressure, particularly in the derivatives market.”

Varma explained that this indicates that traders may be able to leverage more leverage rather than simply moving their BTC to cold storage. That would mean that much of Bitcoin's recent price movement has been driven by leveraged trading, particularly in the derivatives market.

“Increasing leverage in the system is a concern for the health of the market, as leveraged positions can lead to increased volatility, especially when events like the upcoming US election are priced in,” he said. It was concluded that “it causes

Edited by Stacey Elliott.