Bitcoin exchange reserves are a great way to gauge investor sentiment in the market. It can indicate when investors are ready to sell, which means they believe the asset has reached an overvalued point. Likewise, it can show when investors are holding onto their pockets and expecting the price of the digital asset to rebound. The latter has been the rule for four months.
Bitcoin exchange reserves have been falling since August with no sign of stopping. This has shown that investor sentiment about the future of the asset is positive and, as a result, they are less willing to abandon their holdings in the market. With November and the rising price of BTC, the approach hasn’t really changed as stock market reserves are heading for an all-time low.
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Bitcoin exchange reserves
A recent report from Glassnode showed that the supply of centralized exchanges continued to decline in the fourth quarter of 2021. Daily withdrawals are increasing as investors pull their holdings off of exchanges for safekeeping in private and cold stores. The report showed that daily withdrawals had hit up to 5,000 BTC, an accelerated figure from the previous week.
This indicates that the market is in the “smart money accumulation” phase. During this phase, investors buy up as many assets as possible and then consolidate their holdings to get better prices. Rather than dumping all of the assets that are waiting for the bear market, BTC is being sold by investors only so they can take strategic profits.
BTC falls to $63k | Source: BTCUSD on TradingView.com
Demand has increased even though the price of BTC has hit new all-time highs. Coins leaving the exchanges at an alarming rate create a supply shortage that is most likely leading to an increase in the value of the digital asset.
Note, however, that the market is nearing the end of this phase. Once it’s over, the price of BTC is expected to see some downward movement, although this will not be enough to keep the market down for too long.
Diamond hands dominate
Declining bitcoin exchange reserves suggest that sentiment is the order of the day. BTC investors postpone selling their assets in anticipation of better market conditions and contradicting previous bear market trends. Expectations that investors would sell their holdings to new all-time highs were debatable as outflows from the exchanges continued even after hitting a new ATH of $ 69,000.
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The balances of the new Bitcoin wallets are also increasing at a rapid pace. Glassnode found that the volume of BTC sent to newly established wallets has increased, with 516,914 transactions recorded with these newly established wallets. An increase of 72% over a three month period.
The market sentiment remains deep in the area of greed and signals buying pressure in the markets. This is expected to continue until at least December. Until then, market analysts are speculating that the price of the digital asset would hit a high of $ 100,000.
Featured image from Bitcoin News, chart from TradingView.com