On-chain data shows that Bitcoin spot and derivatives exchange reserves have risen recently, a sign that could be bearish for the price.
Bitcoin Spot and Derivatives Reserves Record Growth
As noted by an analyst in a CryptoQuant after, outstanding interest and financing rates are also rising in the BTC market. The “exchange reserveis an indicator that measures the total amount of Bitcoin that investors are currently depositing into wallets of centralized exchanges.
This statistic has two versions; one is for the spot exchanges, the other for the derivative platforms. Typically, investors deposit on spot exchanges for selling purposes, so an increase in the reserves of these platforms may indicate that the selling pressure in the market is increasing.
And since holders use derivatives exchanges to open positions on the futures market, an increase in this reserve can lead to higher volatility (the effect on price can be in both directions).
Now, here is a chart showing the trend in these 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, both cash and derivatives reserves have been rising in value recently, suggesting that investors have been making deposits on these platforms. Increased spot reserves indicate increased selling pressure in the market, while derivatives reserves indicate an overheated futures sector.
The chart also includes data for two other metrics, outstanding interest and financing rates. The “open interestis an indicator that measures the total number of futures positions currently open on derivatives exchanges. This statistic takes into account both short and long contracts.
The chart shows that this metric has also recently risen, further suggesting that the futures market is currently overheated. The other indicator, the “financing rates”, tells us if there are more shorts or longs in the market.
Bitcoin funding rates are now favorable, implying that the longs are overwhelming the shorts. In general, this metric swing somehow tells us which of these contract holders is more at risk of liquidation.
So far there has been no long squeeze in the market, but rather a short squeeze as the price has managed to maintain momentum. There have been a few high liquidations over the past day, that may have helped calm the overheated futures market for now, but as there is increased selling pressure on the 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 image from Thought Catalog at Unsplash.com, charts from TradingView.com, CryptoQuant.com