On-chain data shows Bitcoin spot and derivative exchange reserves have both risen recently, a sign that could be bearish for the price.
Bitcoin Spot and Derivative Reserves Register Growth
As indicated by analysts in the CryptoQuant post, open interest and funding levels are also heating up in the BTC market. “Exchange reserve” is an indicator that measures the total amount of Bitcoin that investors have deposited into a centralized exchange wallet today.
This metric has two versions; one is for spot exchange, while the other is for derivative platforms. Usually, investors deposit into the exchange for the purpose of selling, so an increase in the platform’s reserves can indicate increased selling pressure in the market.
And as the holder uses the derivative exchange to open a position in the futures market, the increase in this reserve can lead to greater volatility (the effect on the price can be in either direction).
Now, here’s a chart showing the trend in Bitcoin exchange reserves over the past month:
The values of all the metrics seem to have seen a rise in recent days | Source: CryptoQuant
As shown in the chart above, spot exchange reserves and derivatives have increased in value recently, indicating that investors have made deposits into these platforms. Increasing spot reserves indicate higher selling pressure in the market, while derivative reserves indicate an overheated futures sector.
The chart also includes data for two other metrics, open interest, and funding rate. “Open interest” is an indicator that measures the total number of futures positions that are currently open on derivatives exchanges. This metric considers both short and long contracts.
The chart shows that this metric has also been trending, further indicating that the futures market is currently very hot. Another indicator, the “funding rate,” tells you if there is more short or long in the market.
Bitcoin funding rates are currently favorable, indicating that longs are outnumbering shorts. In general, either way this metric swings tells you who owns the contract more at risk for liquidation.
So far, there are no long coins in the market, but only a little because the price can follow the momentum. There has been some high liquidation over the past few days which may help the currently overheated futures market, but given the increased selling pressure on spot exchanges, BTC is still at risk of a short-term pullback.
BTC price
At the time of writing, BTC is trading around $19,100, up 14% over the past week.
Looks like the value of the crypto has surged in the last few days | Source: BTCUSD on TradingView
Featured images from Thought Catalog on Unsplash.com, charts from TradingView.com, CryptoQuant.com