- The BTC exchange reserve fell to around 2.6 million.
- This is the lowest level in over four years.
Bitcoin (BTC) foreign exchange reserves recently fell to their lowest levels in years, a significant development at a time when the BTC price is struggling to gain momentum.
While the current price action may be cause for concern, this decline in foreign exchange reserves could be a positive signal for the future Bitcoin price.
Bitcoin exchange reserves are falling
AMBCrypto’s analysis of Bitcoin exchange reserves on CryptoQuant revealed significant developments: reserves fell to their lowest level since 2020.
The chart shows that Bitcoin reserves on exchanges have fallen from over 3.2 million BTC in early 2020 to around 2.6 million BTC.
Exchange reserves represent the amount of Bitcoin held on exchanges and available for immediate trading.
High reserves indicate greater supply on exchanges, which in turn can lead to increased selling pressure and potentially lower prices.
Conversely, as reserves decrease, the supply available for trading decreases, which can lead to price increases due to lower selling pressure.
Source: CryptoQuant
The continued decline in exchange reserves likely indicates that investors are withdrawing their bitcoins from exchanges to store them in private wallets.
This shift may lead to less selling pressure in the market, creating a favorable environment for price increases.
In particular, the chart shows that there will be sharp declines in foreign exchange reserves in late 2022 and mid-2023, coinciding with the rise in Bitcoin’s price.
This pattern supports the notion that lower foreign exchange reserves contribute to bullish price action. Lower availability on exchanges can push prices higher if demand remains stable or increases.
The current price development
According to AMBCrypto’s analysis, Bitcoin was trading at around $59,628.07 at press time, up slightly by over 0.22%.
However, it faced significant resistance at the $61,532.51 and $62,679.20 price levels marked by the long and short moving averages (blue and yellow lines).
Source: TradingView
The Relative Strength Index (RSI) was at 47.17, just below the neutral mark of 50, which suggests a slight downward momentum in the market.
Although the Moving Average Convergence Divergence (MACD) was positive at 68.44, the signal line remained negative at -1,147.80.
The MACD histogram suggested a weakening bearish momentum but has not yet strengthened enough to signal a bullish trend reversal.
How the reserve trend could affect BTC
Despite the current bearish indicators in the Bitcoin chart, the continued decline in foreign exchange reserves suggests that a different development could emerge.
Market participants have been withdrawing their Bitcoins from exchanges, possibly to hold them for the long term. This could reduce selling pressure and provide fundamental support for the price.
If this trend of declining foreign exchange reserves continues, it could act as a counterweight to the pessimistic technical constellation.
Even though technical indicators currently point to weakness, the reduced availability of BTC on exchanges could stabilize the price or even contribute to a gradual increase due to scarcity.
Read Bitcoin (BTC) price prediction 2024-25
However, if the Bitcoin price continues to struggle below these moving averages and the RSI continues to weaken, there could be a deeper decline before meaningful support is found.
While declining foreign exchange reserves could limit the severity of a potential sell-off, they could not prevent it entirely.
