How 39,000 Bitcoin re-entering exchanges is impacting its bull run

Bitcoin has been consolidating in a range above $55,000 since recovering from the November 26 crash. Over the past few days, there has been no form of structural break indicating a bearish bias. But an interesting on-chain development suggests a possible dire situation.

While Bitcoin remained at $56,460, the probability of a breakout is high, but surprisingly the direction is still uncertain. In this article, we will analyze the fundamental shift and why it may or may not have bearish implications.

Bitcoin exchange reserves increase for the first time since September 2020

Source: CryptoQuant

A fundamental bullish indicator that has been relied upon since the start of the bull run last year is the declining supply of Bitcoin on exchanges. Since March 2020, a trend was beginning to emerge where investors were taking BTC off-exchange and eventually storing it in their private wallets.

Less BTC on the exchanges meant less selling pressure, as the illiquid supply of Bitcoin increased. It was a strong bullish narrative throughout the rally, but now a dramatic shift has been seen.

According to CryptoQuant, the amount of Bitcoin entering the exchange in the past 24 hours has reached 39,000 BTC, worth nearly $2.2 billion. This is a large amount of capital entering the exchanges and this is the first massive inflow since September 2020.

At first glance, this can be seen as a strong bearish sign. Such a large influx into the exchanges means that a collective of individuals could possibly be looking to sell their BTC within the current range, which is 15% from the ATH level. However, analytically, it could also mean another bullish catalyst. Check it out.

Cash exchanges

Source: CryptoQuant

Now, if the above graph is observed, it is clear that in the past 24 hours, bitcoin exchange reserves on derivatives exchanges have increased, not spot exchanges. With spot FX reserves holding steady, selling pressure might not be evident from investors, but leveraged traders might be a game.

With increasing derivatives trading reserves, it can be assumed that a group of individuals might seek to leverage higher profits for an upcoming price rise. Therefore, dumping BTC on derivatives exchanges makes sense, in terms of creating new orders.

All in all, it is not yet time for Bitcoin investors to panic. The price does not yet reflect a change in the market and over the next few days the trend will become clearer.