Bitcoin reserves in exchanges falling by $5 billion by 2020 indicate accumulation of whales

Bitcoin’s reserves in exchanges fell by $5 billion last year, showing signs of accumulation.

Bitcoin (BTC) reserves in exchanges continue to fall, suggesting that retail investors and whales may be accumulating.

According to CryptoQuant data, all exchange reserves fell to 2.4 million BTC, the equivalent of US$25 billion. In contrast, in October 2019, the exchanges had about 2.8 million BTC, which is currently worth US$30 billion.

There is a clear fall in the selling pressure of whales and retail investors

Exchange reserves increase when investors deposit Bitcoin. Usually, deposits or inflows are considered selling pressure because traders need to send BTC to exchanges in order to sell.

Consequently, when foreign exchange inflows decrease, it usually means that investors‘ appetite to sell BTC is declining.

Another CryptoQuant graph shows the trend of net Bitcoin inflows into exchanges over the same period.

Over the last two months, net inflows have generally remained at the negative level of 20,000 BTC. Net inflows have fallen sharply in recent weeks, specifically because BTC has recovered sharply from $10,300 to over $10,700.

On September 26, the Cointelegraph reported that large clusters of whales emerged at US$10,407. Clusters of whales form when whales accumulate new BTC and do not touch the new properties. Clusters usually indicate that whales are beginning to accumulate in a new area.

Considering the accumulation trend and the resilience of BTC above US$ 10,000, investors probably have little appetite to sell.

Due to the confluence of unwillingness to sell Bitcoin Legacy review at current prices and consistent accumulation, BTC is on track for a strong quarterly close.

Another possible reason behind the sharp drop in exchange rate network flows may have been large scale hacks. More recently, KuCoin would have had $150 million hacked after the private hot wallet keys were compromised.

BTC on track for its second-best quarterly closing

According to Skew, Bitcoin is on its way to seeing its second-best quarterly close. The BTC closed the second quarter at about US$9,140. It would have to stay above US$10,600 to secure the second-best quarterly close.

There are several reasons behind Bitcoin’s strong performance over the third quarter. Most notably, the BTC went up along with gold and shares after the US approved a stimulus project.

The kick-start to a market-wide recovery from the stimulus, combined with a low interest rate environment, created a favourable macro scenario. Skew analysts said:

„Another day to go and still looking like the second-best quarterly close for bitcoin, but it will be a difficult decision for the second quarter of 2020.“

Over the course of the year, there are three key macro factors that may drive Bitcoin sentiment, namely the weakening of the US dollar, the prospect of a stimulus package and vaccines.

Meanwhile, the US dollar continues to show weakness against reserve currencies such as the yen, yuan and franc, with the Fed doubling its strategy of average inflation targets.

But while prolonged dollar weakness could put the US stock market at risk of underperformance relative to other markets, it should directly benefit Bitcoin and gold, which are quoted against the dollar.