On-chain data shows the Bitcoin reserve of derivative exchanges has surged up recently as the price of the crypto has continued to crash down.<\/p>\n
Bitcoin Derivatives Exchange Reserve Observes Sharp Uptrend<\/p>\n
As explained by an analyst in a CryptoQuant post, the crashing BTC price may be forcing whales and long-term holders to open short positions in order to hedge their portfolios.<\/p>\n
The \u201cderivative exchange reserve\u201d is an indicator that measures the total amount of Bitcoin currently present on wallets of all derivative exchanges.<\/p>\n
When the value of this metric goes up, it means coins are entering into derivative exchanges right now. Such a trend may mean investors are opening leveraged positions at the moment, which can result in higher volatility in the value of the crypto.<\/p>\n
On the other hand, a downtrend in the indicator implies investors are withdrawing their coins from these exchanges currently.<\/p>\n
Now, here is a chart that shows the trend in the Bitcoin derivative exchange reserve over the past year:<\/p>\n\n
The EMA 7 value of the metric seems to have observed some uptrend recently | Source: CryptoQuant<\/p>\n
As you can see in the above graph, the Bitcoin derivative exchange reserve had been heading down for quite a while, until recently when the indicator\u2019s value once again started rising up.<\/p>\n
Recent data suggests that the crash in the coin\u2019s price has pushed around 50% of the total BTC supply into\u00a0loss. Based on this, many long-term holders and whales are also bound to be underwater right now.<\/p>\n
Related Reading |\u00a0Bitcoin Breaches $19K Level \u2013 Will Selloff Continue? What\u2019s The Next Bottom?<\/p>\n
The quant believes that the uplift in the derivative reserve is because of these long-term holders and whales panicking about their portfolios losing value.<\/p>\n
These holders are looking to hedge their portfolios and reduce risk by opening short positions on derivative exchanges.<\/p>\n
The analyst points out, however, that such aggressive shorting would create even more selling pressure, causing the price to see further drawdown.<\/p>\n
Related Reading |\u00a0Bitcoin Long-Term Holders Now Own Nearly 80% Of Realized Cap<\/p>\n
But another possibility also arises from this situation, and that would a huge short squeeze. A lot of demand and a sudden reversal in the price of Bitcoin will need to occur before such an event can take place.<\/p>\n
The quant thinks it may take more time and further decline in the value of the crypto for the correct conditions to align for it.<\/p>\n
BTC Price<\/p>\n
At the time of writing, Bitcoin\u2019s price floats around $19.3k, down 29% in the last seven days. Over the past month, the crypto has lost 33% in value.<\/p>\n\n
Looks like the value of BTC has rebounded back a little after a dip below $18k | Source: BTCUSD on TradingView
\nFeatured image from Unsplash.com, charts from TradingView.com, CryptoQuant.com<\/p>","protected":false},"excerpt":{"rendered":"
<\/p>\n
On-chain data shows the Bitcoin reserve of derivative exchanges has surged up recently as the price of the crypto has continued to crash down.<\/p>\n
Bitcoin Derivatives Exchange Reserve Observes Sharp Uptrend<\/p>\n
As explained by an analyst in a CryptoQuant post, the crashing BTC price may be forcing whales and long-term holders to open short positions in order to hedge their portfolios.<\/p>\n
The \u201cderivative exchange reserve\u201d is an indicator that measures the total amount of Bitcoin currently present on wallets of all derivative exchanges.<\/p>\n
When the value of this metric goes up, it means coins are entering into derivative exchanges right now. Such a trend may mean investors are opening leveraged positions at the moment, which can result in higher volatility in the value of the crypto.<\/p>\n
On the other hand, a downtrend in the indicator implies investors are withdrawing their coins from these exchanges currently.<\/p>\n
Now, here is a chart that shows the trend in the Bitcoin derivative exchange reserve over the past year:<\/p>\n
The EMA 7 value of the metric seems to have observed some uptrend recently | Source: CryptoQuant<\/p>\n
As you can see in the above graph, the Bitcoin derivative exchange reserve had been heading down for quite a while, until recently when the indicator\u2019s value once again started rising up.<\/p>\n
Recent data suggests that the crash in the coin\u2019s price has pushed around 50% of the total BTC supply into\u00a0loss. Based on this, many long-term holders and whales are also bound to be underwater right now.<\/p>\n
Related Reading |\u00a0Bitcoin Breaches $19K Level \u2013 Will Selloff Continue? What\u2019s The Next Bottom?<\/p>\n
The quant believes that the uplift in the derivative reserve is because of these long-term holders and whales panicking about their portfolios losing value.<\/p>\n
These holders are looking to hedge their portfolios and reduce risk by opening short positions on derivative exchanges.<\/p>\n
The analyst points out, however, that such aggressive shorting would create even more selling pressure, causing the price to see further drawdown.<\/p>\n
Related Reading |\u00a0Bitcoin Long-Term Holders Now Own Nearly 80% Of Realized Cap<\/p>\n
But another possibility also arises from this situation, and that would a huge short squeeze. A lot of demand and a sudden reversal in the price of Bitcoin will need to occur before such an event can take place.<\/p>\n
The quant thinks it may take more time and further decline in the value of the crypto for the correct conditions to align for it.<\/p>\n
BTC Price<\/p>\n
At the time of writing, Bitcoin\u2019s price floats around $19.3k, down 29% in the last seven days. Over the past month, the crypto has lost 33% in value.<\/p>\n
Looks like the value of BTC has rebounded back a little after a dip below $18k | Source: BTCUSD on TradingView
\nFeatured image from Unsplash.com, charts from TradingView.com, CryptoQuant.com<\/p>\n
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