Bitcoin Derivatives Exchange Reserve Surges Up As BTC Continues To Plunge

Keshav Verma

1 year ago

3 mins read

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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.

Bitcoin Derivatives Exchange Reserve Observes Sharp Uptrend

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.

The “derivative exchange reserve” is an indicator that measures the total amount of Bitcoin currently present on wallets of all derivative exchanges.

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.

On the other hand, a downtrend in the indicator implies investors are withdrawing their coins from these exchanges currently.

Now, here is a chart that shows the trend in the Bitcoin derivative exchange reserve 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 above graph, the Bitcoin derivative exchange reserve had been heading down for quite a while, until recently when the indicator’s value once again started rising up.

Recent data suggests that the crash in the coin’s price has pushed around 50% of the total BTC supply into loss. Based on this, many long-term holders and whales are also bound to be underwater right now.

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.

These holders are looking to hedge their portfolios and reduce risk by opening short positions on derivative exchanges.

The analyst points out, however, that such aggressive shorting would create even more selling pressure, causing the price to see further drawdown.

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.

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.

BTC Price

At the time of writing, Bitcoin’s price floats around $19.3k, down 29% in the last seven days. Over the past month, the crypto has lost 33% in 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

Keshav Verma

Keshav is currently a senior writer at NewsBTC and has been attached to the website since June 14, 2021.

Keshav has been writing for many years, first as a hobbyist and later as a freelancer. He has experience working in a variety of niches, even fiction at one point, but the cryptocurrency industry has been the longest he has been attached to.

In terms of official educational qualifications, Keshav holds a bachelor’s degree in Physics from one of the premier institutes of India, the University of Delhi (DU). He started the degree with an aim of eventually making a career in Physics, but the onset of COVID led to a shift in plans. The virus meant that the college classes had to be delivered in the online-mode and with it came free time for him to explore other passions.

Initially only seeking to make some beer money, Keshav unexpectedly landed clients offering real projects, after which there was no looking back. Writing was something he had always enjoyed and to be able to do it for a living was like a dream come true.

Keshav completed his Physics degree in 2022 and has been focusing on his writing career since, but that doesn’t mean his passion for Physics has ended. He eventually plans to re-enter university to obtain a masters degree in the same field, but perhaps only to satiate his own interest rather than for using it as a means to find employment..

Keshav has found blockchain and its concepts fascinating ever since he started going down the rabbit-hole back in 2020. On-chain analysis in particular has been something he likes to research more about, which is why his NewsBTC pieces tend to involve it in some form.

Being of the science background, Keshav likes if concepts are clear and consistent, so he generally explains the indicators he talks about in a bit of detail so that the readers can perhaps come out having understood and learnt something new.

As for hobbies, Keshav is super into football, anime, and videogames. He enjoys football not only as a watcher, but also as a player. For games, Keshav generally tends towards enjoying singleplayer adventures, with EA FC (formerly FIFA) being the only online game he is active in. Though, perhaps due to being ultra-focused on the game, he is today a semi-pro on the EA FC scene, regularly participating in tournaments and sometimes even taking back prize money.

Because of his enthusiasm for anime and games, he also self-learned Japanese along the way to consume some of the untranslated gems out there. The skill didn’t merely remain as just a hobby, either, as he put it to productive use during his exploration for small-time gigs at the start of COVID, fulfilling a couple of Japanese-to-English translation jobs.

Keshav is also big into fitness, with agility and acceleration-related workouts making a big part of his program due to the relevance they have in football. On top of that, he also has a more traditional strength based program for the gym, which he does to maintain an overall fitness level of his body.

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