Bitcoin Forum

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Recently too, on-chain analysis shows large outflows on such exchanges, especially on Coinbase exchange.

I recently subscribed to some on-chain analysis which showing some inflows/outflows of Bitcoin on some exchanges, and sometimes I saw it has some connection with the price action, like inflow on exchange = dump, outflow = pump. But not all of the time.

What are your thoughts on the Bitcoin reserves of exchanges? Can this guarantee an indicator for Bitcoin price action?

Yes, it ought to be that way.

Like three weeks back when the price of bitcoin dumped to almost $45000, it was reported that miners are not selling and that whales are moving bitcoin from exchanges into wallet, it was predicted at the time that the price of bitcoin will increase, and it increased to over $62,000. But, in the case people are selling bitcoin, while other cryptocurrencies are having down price trend at the time, which means they are selling it for fiat, this will be the indication that some people will move their bitcoin into exchanges and sell off, while some having their funds on exchanges will also sell off at the time.

Inflow: it will result to dump because people are moving their bitcoin from wallet into exchanges for no two reasons than to sell
Outflow: it will result to pump because people are moving their bitcoin into wallet to hold or during swing trading.

One thing's for sure — it's going to decrease sell pressure on exchanges, which we could say has a positive effect. But in the end, it's still going to mostly depend on the demand.

Also, I'd like to be realistic and not too bullish. Let's not forget that while people are withdrawing their funds from the exchanges(as indicated in the chart), let's not forget that they could just as easily send all the coins they've withdrawn back to the exchanges if they really wanted to sell.

It cannot be a guarantee because much of the trading that was done on bitcoin is with leverage. The dump might be caused by leveraged traders who are closing their trades and profit taking. Your chart also can be an argument that bitcoin has become very illiquid and can be manipulated easily.

This does not make any sense because you are not selling to or buying from the exchange, instead you are trading with another individual on the exchange platform.
That means for every sell there is a buy and for every buy there is a sell.

The only relationship there is between how much bitcoin there is on exchanges and price is when there is more trades taking place on the exchange that means there is more bitcoin deposited and that only happens when price is making a big move whether upward or downward.

Right now the price is getting more stable so there is less profit to be made by day traders so they are pulling their bitcoins out and usually moving it to shitcoin market to pump and dump them to make profit. That is also why altcoins go up only when bitcoin is stable and dump when it is rising or falling.

That's what I thought initially thinking of all these headlines. Reserves could be tied to much larger volume of trade (in fact I always wondered, if I'm trading $10 at 10x leverage, is my volume calculated at $100?). And definitely when people say profit taking it's scalpers all the time who swipe 1% profit at leverage, which makes it simple to see why we need many attempts to overcome a barrier like say now at $60k.

I think that this correlation doesn't seem right.
When the crypto exchanges want to increase their Bitcoin reserves,they must be buying more BTC,therefore increasing the demand for BTC and probably having an impact over an increasing Bitcoin price.
Therefore inflows of BTC inside a big cryptocurrency exchange would have to lead to a price Bitcoin pump.
Anyway,such correlation hasn't been proven so far.I don't know the exact amount of Bitcoin reserves,that the big crypto exchanges are holding.There's no accurate data about this.

Not all the time of course. This means it does not have an established direct correlation.

But personally, I think a diminishing exchange supply means the demand is rising and that the supply being traded on exchanges are going low. If Bitcoin reserves in exchanges are being pulled out, it could mean that sellers are actually decreasing. This to me is a bullish sign that may mean Bitcoin owners are probably changing approach from trading to just hodling.

I think it’s just security measures. Don’t want to have all your coins on hot wallets.

exchange reserves. is not the exchanges 'profit'(personal holdings) ... its simply the deposits of users..

more people depositing coins into an exchange = more people wanting to sell coins.
the complicated part that makes it not a guarantee metric to use alone.. is that coin deposits is just the supply side.
you need to know the fiat(stablecoin) deposits to know how many are willing to buy. which is the demand side

That's most probably a way for them to unload and use companies as well. Think about it, they charge you a trading fee, and what do they do with that trading fee? They mostly hold it and not sell it, if they kept selling every single profit they made it would crash the bitcoin price a lot, they can't do that on the market prices because it would go down and cause them to lose money. What did coinbase do? Found some companies who wanted to invest into crypto, they gave a bit of a discount so that they would pick coinbase, and eventually sold it wholesale and got out.

This way companies bought bitcoin with a discount, market was intact and didn't get destroyed and coinbase gave away all their bitcoins for a good price that would have been less if they sold on market. Everybody won from this deal and I think that's what happened with the exchange reserves.

Still needing for further observations for me but if it turns out to be that way then it isnt really a bad thing for you to consider it out to be included into your analysis when making decisions neither
entering or exiting the market.Im not really that much of concern nor serious on looking these outflow/inflow on exchangers but since you do mention it then i would try to make some
peak and lets see if it does really contribute with my own analysis when it comes to price actions.

There is also the argument that the exchanges have fractionalized and use the printed bitcoin in their ledgers to trade back and forth in its orderbooks. This might be accused of another fud from me, however hehehe.

Yes I agree that its bullish when there are more coins leaving exchanges because there is less supply to sell and might result in higher prices however there can be many reasons why coins are leaving exchanges.

Back in the March 2020 crash, many coins were sent to exchanges and the price of BTC went up anyways. So this indicator doesn't always work keep in mind.

Another reason why can simply be because if you owned 0.25BTC back when BTC was $10K, it was only $2500. So its not that much. However that 0.25BTC is now worth over ~$13K. Basically you can get a decent car for that price. So people most likely bought hardware wallets and withdrew to keep their funds safe.

Yeah, it somewhat contradicted itself, so not sure of a bullish indication though. There are so many correlations that we can seen and it's either a hit or a miss. Might be interesting to see if this holds true in a bearish trend, for sure we might see some inverse correlation.

So for now, I would say that it's 50/50 indication. So it's not a guarantee for bitcoin price action.

Of course, this is a strong indicator, the more Bitcoin reserves in the exchanges, this means a possible increase in the price, the exchange reserves indicate that the bitcoin is stored cold while waiting for the price rise, of course this is logical because the Bitcoin Holdings means a decrease in the quantity supplied and this will definitely lead to higher prices. And vice versa, meaning a decrease in bitcoin reserves in the exchanges will be an indication of a fall in prices.

No indicator can grantee the bitcoin price action but these indicators helps in determine only the probability of the price actions. It you see outflow of bitcoin from the exchanges which leads to conclusion that people are buying bitcoin and keeping them in their private wallets for long term gains. This will decrease the supply in exchanges and hence make the price rise parabolically.

We can see from the past few days that this is true since there has been a tremendous increase in both the number of altcoins that are being pumped and the size of the altcoin pumps that we have seen during this time. This shows that the bitcoin balances are being moved from bitcoin exchanges to altcoin exchanges to pump and dump altcoins and make profit while bitcoin is in accumulation stage. Then dump that altcoins as soon as bitcoin crosses $60k (like always).

Back test your method and if you find a positive result (which more than 50%, perhaps, of the outcome is correct), you can use it as a trust indicator. Each trader has their own method and strategy to deal with the market' beast. Some are old, traditional or even obsolete while others are newly-created, advance and complex but they will remain useless if users do not effectively harvest from these methods

So, just try for yourself. Im a traditional man, I believe in supply and demand and any candlestick I find on the chart. Luckily, I still maintain my profit weekly up to now.

Yes, I think so. It's one more indicator that goes along the lines of what most of us think: that the price at least in the medium term has to keep going up. It cannot be taken as the only indicator to explain the price rise, but it reinforces the current picture we see regarding Bitcoin of increasing demand and reduced supply.

Trading volume on exchanges is not depend on exchanges' bitcoin reserves or how much bitcoin is stored on exchanges from whales, institutes. It is my guess and not yet verified by data.  :)

I think the same about big movements that are seeding on social media at important periods of price movements. Around the times for corrections or break outs, such big movements were broadcasted and detected by Whales Alert as well as spreading on media.

You wrote about the easy step of bitcoin transactions (in and out of exchanges) and I agree with you.