Binance, Coinbase Bitcoin Reserves Fast-Dropping, Is This Bullish?
11 May 2023 - 9:00AM
NEWSBTC
According to CryptoQuant’s data on May 10, Bitcoin reserves in
centralized exchanges such as Binance and Coinbase experienced a
significant decline in Q4 2022. The reserves remained stable in
April despite the prices soaring from $20,000 to $31,000 during
that period. Exchange Bitcoin Reserves Rapidly Shrinking Bitcoin
exchange “reserves” is a metric that tracks the amount of BTC held
by centralized exchanges at any given time. Typically, the
interaction between coin holders and exchanges can be used to gauge
sentiment and their price expectation of the coin shortly.
Related Reading: Bitcoin Supply Is Moving From American Holders To
Asian Wallets: Glassnode An example of reserves falling is when
there is a sudden outflow from exchanges. This could indicate that
users are optimistic and store their assets in non-custodial
wallets. However, it’s important to note that this may not always
be the reason for outflows. They can also be caused by fundamental
factors such as hacks or regulatory concerns – as seen recently
with Binance. Conversely, Bitcoin inflow to exchanges may drive the
ramp’s reserves higher. Even so, this is interpreted as bearish
since holders might quickly liquidate their assets for cash or
stablecoins. With Bitcoin reserves across centralized exchanges
falling, it could mean traders expect prices to rise shortly. In Q4
2022, the total Bitcoin exchange reserve in all tracked ramps fell
sharply, especially in November 2022. This coincided with the
collapse of FTX and questions emerging about the stability of
Binance and other centralized exchanges. Binance, the world’s
largest cryptocurrency exchange, led other platforms in publishing
proof-of-reserve statements to assuage fears and re-instill
confidence. Though reserves have stabilized, there was a marked
drop in late March 2023. Then, the bank run at Silicon Valley
Bank (SVB) and the closure of Signature Bank, banks that served
crypto projects, including Circle, the issuer of USDC, appeared to
have triggered coin outflows. From March 20 to early April, the
Bitcoin exchange reserve fell from around 2.2 million to 2.1
million. Will BTC Rally? The general trend of Bitcoin exchange
reserves remains negative, and prices are relatively firm, trading
below $31,000. While this correlation between rising prices and
falling exchange reserves is still valid, whether regulatory
actions against crypto exchanges may cause a divergence is yet to
be seen. Binance is reportedly being investigated by several United
States agencies, including the Commodity Futures Trading Commission
(CFTC) and the Securities and Exchange Commission (SEC). The CFTC
alleges that Binance, the world’s largest exchange, flouted trading
laws in the country. Still, whether charges will be brought forward
is being determined when writing. Related Reading: Bitcoin
Slides 5% From Recent Highs Amidst Binance CFTC Probe Revelation
Any official charge might dent users’ confidence in the exchange,
possibly triggering more outflows and lowering BTC reserves.
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