Now, on examining the above graph, some interesting features can be seen. In the lead-up to the 2021 bull run, the exchange reserve was coming down from a very high value. This makes sense as a downtrend like that one means investors were accumulating more coins, which can help drive the price up.
Then, around when Bitcoin hit its all-time-high (ATH), the metric started climbing back up quick, indicating a selloff, and thus the price crashed in response.
The current sharp dip, however, looks different. The BTC reserve has actually been on a decline, implying investors haven’t been quick to selloff on these spot exchanges.
This would mean that this selloff may have been entirely driven by derivatives, unlike the May crash where spot exchanges also played a big role.
At the time of writing, Bitcoin’s price is around $47k, down 5% in the last 7 days. Over the past month, the cryptocurrency has accumulated 3% in gains.
The below chart shows the trend in the value of the coin over the past five days.
BTC's price shows a lot of volatility | Source: BTCUSD on TradingView
Two days ago, Bitcoin saw absolute chaos in price action as the coin’s value went from $50k all the way down to $43k within the matter of fifteen minutes. And then just minutes later, BTC had already recovered above $47k.
The coin dipped back down to $44.4k yesterday, but it is already back to $47k now. It’s hard to say at the moment where the price might head next, but one thing can be expected for sure: more volatility ahead.
Featured image from Unsplash.com, charts from TradingView.com, CryptoQuant.com