Bitcoin reserves on centralized exchanges hit five-year low amid increased hodling

Bitcoin reserves on centralized exchanges are now at 2.76 million BTC, according to CryptoQuant data, marking its lowest level in five years. The decline in the amount of Bitcoin held on exchanges suggests a return to hodling by investors.

Generally, a decline in the Bitcoin exchange balance is a bullish signal, showing that more investors are unwilling to sell and have conviction in the asset. However, this decline follows a massive selloff of 10,000 BTC worth $600 million by whales last week.

Market returning to Bitcoin accumulation

Despite that selloff, market experts believe the selling pressure is over, and investors have returned to holding BTC. Glassnode analysts noted that on-chain data shows long-term holders (LTH) are returning to the accumulation phase. Experts believe this could end all investors’ prolonged period of supply distributions since March.

One of the best signs of this is the Bitcoin accumulation trend score (ATS), which measures changes in the market. The metric recorded its highest possible value of 1.0 as over 374,000 BTC migrated into the LTH status in the past three months.

Analysts at Glassnode wrote:

“Despite challenging and choppy market conditions, Long-Term Bitcoin Holders remain remarkably steadfast in their conviction, with evidence they are ramping up accumulation behaviour.”

Interestingly, even when there have been selloffs, the spot price has remained above the Active Investor cost basis, which is the average cost of acquiring the active coins in the market. This shows that most sell-offs have been profitable, and investors remain bullish on short- and medium-term price increases.

Will the selling pressure return?

With the decline in Bitcoin on centralized exchanges, many analysts believe that the selling pressure for BTC might be over, at least for now. On-chain data also back this up, as the exchange stablecoin ratio fell to its lowest level since February 2023.

The exchange stablecoin ratio measures the amount of BTC held in centralized exchange wallets relative to stablecoins on the exchanges. A low value generally signifies higher buying power and potential for price increases. CryptoQuant data shows it is now at 0.000115 and has been falling since July.

However, there are also concerns that selling pressure might return soon, particularly with the recent BTC movement. A few days ago, 18,536 BTC, which had been dormant for around 2-3 years, moved on-chain. Since then, thousands of BTC inactive for periods ranging from 6 months to 5 years have also been moved on-chain.

Crypto analyst XBT Manager stated that the surge in activity among long-dormant coins generally indicates increased selling pressure, which could cause prices to fall if liquidity is low.

Nevertheless, BTC appears to be in a good place right now. The flagship asset has increased by 2.6% in the last 24 hours and gained 7% in the past seven days. With BTC currently trading comfortably above $60,000, the question is whether it will fall again.