BTC On-Chain Analysis: Exchange Balances Continue Drying Up

A look at on-chain indicators for Bitcoin (BTC), more specifically those related to exchanges and institutional investors.

After a brief period in May in which exchange balances were increasing, they have started to dry up once more and reached a yearly low on Sept 26.

BTC Exchange balance

The total amount of BTC that is held on exchange wallets has been steadily moving downwards since March 2020, when an all-time high of 3,118,057 BTC (black arrow) was held in such addresses. 

The decrease led to a low of 2,494,840 on April 11. This meant that during this time, investors had been steadily buying BTC from exchanges. 

Following the May price drop, the number of coins held on exchange addresses began to increase, potentially as a result of investors transferring their coins in order to sell, it has been moving downwards once more, reaching a lower low of 2,452,843 on Sept 29.

This is better visualized with a closer look at the movement since May. This shows the indicator increasing during May, when the BTC price fell towards $30,000.

However, after the ongoing upward movement that began in July (black circle), the balance on exchange addresses has been drying up once more.

Trend signals

A look at the exchange net position change shows that after the previously outlined period in which net inflows were positive (black circle), they have become negative once more. 

As is visible from the 2017-2020 readings, positive net position changes are a staple of a bear market. This occurs because investors rush to take profit and sell their coins. Furthermore, they occur during the beginning of bull markets, when investors are realizing profits. 

However, a negative net position change is usually a sign of accumulation, which occurs during a bullish trend.

Furthermore, the funding rates are close to negative. This does not provide a clear sentiment for the trend. Funding rates increase/fall significantly during times of euphoria or panic, when the BTC price rises/drops quickly for a short-period of time. 

For BeInCrypto’s latest Bitcoin (BTC) analysis, click here.

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