By Michael Scott
Bitcoin stages recovery coincidentally as exchange reserves slip to multi-year low when the altcoins saw a brutal week unfold.
Bitcoin is leading the charge to recover from the previous week’s setback, which saw a marketwide plunge for crypto. At present, the crypto exchanges hold an estimated 2.39 million Bitcoins. This represents a 25% decline from the 2020 peak.
The largest crypto by market value saw a slip in the past 24 hours to exchange hands around $57,250. Bitcoin is recovering from the Monday morning tumble to trade above $58,000 per CoinGecko data.
Brutal Week for Crypto
Delving into data shows that Bitcoin’s price dipped to the day’s floor at $57,257.7, CoinGecko shows. Bitcoin rebound is evident, with the price rising to $58,419.26 to realize a flat trade on the day, though down 8.6% in the past week. Analysts attribute the dismal weekly performance to the continued outflows in investment products and declining exchange reserves.
Nexo head of structured products, Kristian Haralampiev, links the sharp decline in BTC prices to the growing market anxiety regarding the non-farm payroll data. Investors are uneasy with the upcoming release and its potential to influence the Federal Reserve’s monetary policy.
Haralampiev observes that with the Federal Open Market Committee (FOMC) set to meet this month, investors are anxious about new economic data releases. The anxiety arises from awareness that the data will significantly influence the decision by the US Federal Reserve (Fed) on rate cuts.
The anxiety in the market is causing mixed signals, which is evident in the liquidation data. The CoinGlass data shows the crypto market witnessed $169 million liquidated in the past 24 hours. The long positions accounted for 74.2%, translating to $125.59 million in liquidation.
Bitget Research senior analyst Ryan Lee elaborated on the crucial factors to watch. The analyst notes that the US welcomes jobless claims data on Thursday, and the unemployment statistics are scheduled for release on Friday.
Lee reiterates the two data points as critical indicators that could influence the Fed’s rate cut decision later this month. The analyst emphasizes the essence of monitoring “on-chain whale activity” besides the Bitcoin exchange-traded fund (ETF) activity.
Investment Products Bleed Profusely
The crypto market suffered significant declines as negative sentiment spread to levels testing the industry’s resilience. The CoinShares report on Monday disclosed that the crypto asset investments suffered $305M outflows in the past week.
The negative sentiment was prevalent across providers and regions. CoinShares lead researcher James Butterfill attributes the shift to the stronger-than-expected economic stats that are diminishing the probability of the Fed announcing a 50-basis point rate cut.
Butterfill notes that Bitcoin had pronounced outflows in the week, with $319 million leaving the long investment products. Surprisingly, the short products bucked the outflow trend. The $4.4M was the second consecutive inflow and set the high mark since March 2024, Buttefill says.
The Ethereum segment is similarly battling severe challenges, and CoinShares is spotlighting the $5.7 million outflows. Besides, the Monday report shows trading volumes stagnating and only 15% away from matching the levels experienced during the week of the US ETF unveiling.
The largest altcoin by market capitalization was down 10% over the past seven days to exchange hands at $2,552 per CoinGecko data. Butterfill points out the surprising twist where blockchain equities realized $11 million in inflows, notably in Bitcoin miner products.
Exchange Reserves Plunge to Multi-Year Low
Delving into the on-chain data shows potential for a bullish long-term trend leading to the rebound from the short-term investment flows. The crypto exchanges currently hold 2.39 million Bitcoin with a cumulative value of $139.86 billion, per Coinglass data.
The current reserves represent a quarter decline from the 2020 peak when the exchanges had nearly 3.2 million Bitcoin reserves. In a recent update, a CryptoQuant analyst links the shift to the preference and adoption of self-custody strategies.
The analyst elaborates that the erosion of BTC reserves on exchanges signals reduced selling pressure, which is the potential that favors the bull market, mainly if the demand growth is sustained.