The seven-day moving average of the number of Bitcoins entering exchanges is a simple indicator of Bitcoin reserves in exchanges. What this has meant, however, is that Bitcoins have been leaving exchanges at a fairly fast rate since October 2020. This “scarcity” was the driving force behind Bitcoin’s buzzing narrative, with the same moving BTC up the charts as well.
Today, while there are other metrics like on-site trading volumes that can also offer market watchers an idea, Bitcoin reserves have traditionally illustrated the course of the price rally over the last few bull runs.
According to CryptoQuant, Bitcoin’s exchange reserves have risen to their January 2021 peaks. Here, it should be noticed that the reserves of Bitcoin continued to fall until February 5th, 21st, after which they climbed again.
As of now, the reserves of Bitcoin are smaller than the estimates for the last quarter of 2020, a period when Bitcoin burst through its resistance stage to reach a new ATH. Press time levels of reserves have, however, signalling a bullish trend and may shift if the inflow of stablecoins to exchanges increases too.
Typically, as inflows to exchanges increase, it is considered a bearish signal since most of the bitcoin or stablecoins flowing into exchanges are sold.
It might have been the worst time in history to sell since we reached the so-called “shakeout zone,” with a map attached to it showing the said zone. This is often considered to be a great reversal predictor, with weak hands shaking out as the inflows of Bitcoin grow to a severe or local high.
This region is also the worst time to be sold at a certain price point in the sales cycle. If it’s the worst time to sell, is it the best time to buy? In reality, it is an ideal time to buy given that the GBTC premium is about 5% and the exchange rate volatility is high as the price has risen by 18.75 per cent in a week at press time.
At the end of January 2021, as exchange reserves rose, we hit a shake-up, and then Bitcoin’s price hit a new ATH above $48,000. The shakeout was the perfect time to buy in as the ATH followed shortly after. In conclusion, selling at the current price point about $47,000 could leave you out of the extended price rally and cost you an opportunity to make higher profits in the coming weeks.
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