Less and less BTC in exchange reserves: are whales accumulating?

Bitcoin’s exchange reserves have decreased by $5 billion over the past year, showing signs of accumulation by whales.

Bitcoin (BTC) reserves on exchanges continue to decline, suggesting that retail investors and whales may be accumulating the crypto asset.

According to CryptoQuant data, total reserves on all exchanges have dropped to BTC 2.5 million, or $25 billion. In contrast, in October 2019 the exchanges held approximately BTC 2.8 million, currently valued at $30 billion.

Sales pressure from whale and retail investors is falling

Exchange reserves increase when investors deposit Bitcoin. In general, deposits or inflows are considered selling pressure, as traders must send BTC to the exchanges to sell them.

Therefore, when inflows to exchanges decrease, it often means that investors are less willing to sell BTC.

Another chart in CryptoQuant describes the trend of Immediate Edge net inflows to exchanges over the same period of time.

Over the past two months, net inflows have generally remained at -20,000 BTC. In contrast, they have plummeted in recent weeks, particularly during the strong recovery of BTC, which took the asset from $10,300 to over $10,700.

On 26 September, Cointelegraph reported the formation of large whale clusters at the $10,407 level. Whale clusters are created when whales accumulate new BTCs and do not move purchased funds. Clusters typically indicate that whales are starting to accumulate in a new area.

Considering the accumulation trend and resilience of BTCs above $10,000, probably the vast majority of investors do not intend to sell.

Thanks to the confluence of low selling pressure at current prices and substantial accumulation, BTC is approaching a strong quarterly closing.

Another possible explanation for the sharp decline in net inflows to exchanges could be related to large-scale hacks. KuCoin recently lost $150 million in a cyber attack after the private keys to its hot wallets were compromised.

BTC is approaching its second best quarterly closure

According to Skew, Bitcoin is on track to record its second best quarterly closing. BTC ended the second quarter at around $9,140. To reach this position, it will have to stay above $10,600.

There are several reasons behind Bitcoin’s excellent performance during the third quarter. In particular, BTC traced a parallel increase to gold and shares after the approval of a stimulus plan in the US.

The initial boost provided by subsidies for a recovery across the market, combined with a low interest rate environment, created a favourable macro backdrop. Skew analysts commented:

„Only one day to go and Bitcoin will record its second best quarterly closing, but it is very close to Q2 2019“.

Between now and the end of the year, there are three important macro and fundamental factors that could support sentiment in Bitcoin’s market, namely the weakening of the US dollar, the possibility of a new subsidy package and vaccines.

Meanwhile, the US dollar continues to show weakness against other reserve currencies, including the yen, the yuan and the franc, while the Fed continues with its strategy for inflation targeting.

A weak dollar could put the US exchange at risk, with potentially worse performance than other markets, but should directly benefit Bitcoin and gold, assets traded against the USD.