Data on the network shows that Bitcoin reserves on derivatives exchanges have recently increased as the price of crypto continues to decline.
Bitcoin Derivatives Exchange Reserve Notices Sharp Uptrend
As analysts explained in CryptoQuant, the post BTC price drop could lead whales and long-term holders to open short positions to hedge their portfolios.
“Derivatives Reserve” is an indicator that measures the total amount of Bitcoin available in the wallets of all derivatives exchanges.
When the value of this indicator increases This means that the coin is now entering the derivatives exchange. Such a trend could mean that investors are opening leveraged positions at the moment. This could result in higher volatility in the value of crypto.
On the other hand, a bearish indicator indicates that investors are currently withdrawing coins from these exchanges.
Here is a chart showing the trends in Bitcoin derivatives exchanges over the past year:
The EMA 7 value of the metric seems to have observed some uptrend recently | Source: CryptoQuant
As you can see in the graph above. Bitcoin derivatives reserves have been declining for some time. Until recently, when the value of the indicator began to increase again.
Recent data suggests that the coin’s price crash has driven approximately 50% of the total BTC supply into losses. From this, many long-term holders and whales are also under water.
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Quant believes the increase in derivatives reserves is due to long-term holders and these whales panic about their portfolios losing value.
These holders want to hedge their portfolios and reduce their exposure by opening short positions on derivatives exchanges.
Analysts point out that such aggressive shorting will create even more selling pressure. causing the price to continue to lose
Related Reading | Long-Term Bitcoin Holders Now Own Nearly 80% of the Realized Cap
But another possibility arises from this situation as well. And that would cause a big squeeze in the short term. The massive demand and sudden reversal of Bitcoin’s price must occur before such an event can occur.
The quant thinks it may take more time and the crypto’s value to continue to decline for the correct conditions to be met.
At the time of writing, the price of Bitcoin has been floating around $19.3k, down 29% over the past seven days. Over the past month, crypto has lost 33% of its value.
Looks like the value of BTC has rebounded back a little after a dip below $18k | Source: BTCUSD on TradingView
Featured image from Unsplash.com, charts from TradingView.com, CryptoQuant.com