Bitcoin is experiencing a challenging period, with its price remaining below the $100,000 mark after a significant drop earlier this week. Today, Bitcoin hovers just above $98,000, marking a nearly 10% decline from its all-time high of over $109,000 recorded last month.
Interestingly, while BTC’s price has slowed, its exchange reserve has faced the same fate, with data showing a continuous decline from this metric.
ShayanBTC, one contributor to the CryptoQuant QuickTae platform, particularly pointed out this trend in a post titled Bitcoin Exchange Reserves Plunge: Is Supply Shock Driving the Next Rally. According to Shayan, there is a chance that this reserve plunge will become favorable for BTC in the near term.
In the post, Shayan disclosed that exchange reservesthe amount of Bitcoin held on trading platformshave steadily decreased. This trend often signals an accumulation phase by investors, as more market participants withdraw their BTC from exchanges to secure long-term holdings.
This reduced circulating supply can create a “supply shock,” potentially driving higher prices in the coming weeks. As shown in the chart, Bitcoins exchange reserves have been on an aggressive decline, signaling an accumulation phase by investors, Shayan explained. The analyst added:
Given that exchange reserves serve as a supply-side indicator, this persistent decline could contribute to further price appreciation in the coming weeks.
Bitcoin Exchange Reserves Plunge
As shown in the chart, Bitcoins exchange reserves have been on an aggressive decline, signaling an accumulation phase by investors. By @ShayanBTC7
Full post ?https://t.co/xxyCDSg3Vw pic.twitter.com/ntVY7AuDpD
CryptoQuant.com (@cryptoquant_com) February 6, 2025
Besides the exchange reserves, another important metric worth looking at to get the full picture of BTC’s likely trajectory in the near term is the Coinbase premium index.This index measures the price difference between Bitcoin on Coinbase, often a go-to platform for institutional investors, and other exchanges.
A positive premium can indicate strong buying pressure on Coinbase, signaling institutional demand. The latest data shows that in recent days, the Coinbase Premium Index broke through the critical 0 resistance level with substantial volume, an occurrence that traders closely monitor.
TraderOasis, another CryptoQuant analyst, highlighted that this breakout area also functions as a support/resistance level, making it a crucial point of interest.
A sustained positive premium might indicate continued institutional accumulation, which could boost Bitcoins price recovery. Conversely, a failure to hold this level could suggest lingering bearish sentiment or a potential for further declines.
Featured image created with DALL-E, Chart from TradingView