Why Bitcoin Reserves on Crypto Exchanges Are Falling

The price curve of Bitcoin (BTC) ended August in the red, from around $64,000 at the beginning of the month, the daily price fell to around $59,000 at the end of the month. But experts are highlighting an indicator that fuels hopes of a trend reversal.

The analysts at CryptoQuant have published a memo that states: The Bitcoin reserves on crypto exchanges have fallen to an annual low, with only around 2.6 million Bitcoin currently stored at Binance, Coinbase and Co.

Like CryptoQuant, Coinglass uses blockchain data to measure Bitcoin holdings on crypto exchanges

Here, too, an annual low has been recorded, but the figure is around 2.4 million Bitcoin. Optimists see this development as a sign that BTC prices will rise again. Because if a freely tradable commodity like Bitcoin becomes rare and demand remains high or increases, the price should theoretically benefit.

However, it should be noted that Bitcoin reserves on crypto exchanges have shrunk by a maximum of 20 percent since the beginning of the year and the BTC price curve has experienced some ups and downs at the same time – the graphics do not indicate a direct connection.

CryptoQuant provides a second possible explanation for the shrinking BTC reserves on crypto exchanges. It could be that investors are deliberately withdrawing their Bitcoin from the relevant trading platforms in order to keep it safe on their own hardware wallets. Such long-term strategies (HODL) indicate that investors are not currently thinking about selling Bitcoin and should at least support the price curve of BTC, according to the analysts. Both theses have their charm, but cannot be clearly proven.

Conclusion: Bitcoin investors hope for the 4th quarter

Historically, September is usually not a good month for Bitcoin price development, in most years BTC ended September in the red. In 2024, the newly introduced Bitcoin ETFs in the USA have proven to have a noticeable influence on the BTC price curve, with a good 17 billion US dollars in capital inflows recorded since mid-January, which at current prices corresponds to around 300,000 Bitcoin that had to be bought by the ETF issuers.

Viewed in this way, there are still a lot of BTC available on the crypto exchanges and many larger Bitcoin purchases are also processed “over the desk”, i.e. at a directly agreed price. In addition, the Bitcoin ETFs experienced capital outflows of around 277 million US dollars in the last week of August. Hopes for an upturn are now being placed in the autumn, when the US presidential elections are also entering their final stretch. In the snapshot, however, Bitcoin seems to lack the momentum that could initiate a new rally.

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(Featured image by Benjamin Nelan via Pixabay)

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