Bitcoin, reserves on Coinbase at lows: bullish signal
Bitcoin, reserves on Coinbase at lows: bullish signal

Bitcoin, reserves on Coinbase at lows: bullish signal

By Eleonora Spagnolo - 2 Sep 2021

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Bitcoin reserves on Coinbase have reached December 2017 levels. This revelation is made by Glassnode.

What do Bitcoin reserves on Coinbase indicate?

The chart published by Glassnode clearly shows that Coinbase held around 700,000 BTC in December 2017.

This amount has grown to over one million BTC in October 2020. With the start of the bitcoin bullrun from October 2020, this amount of cryptocurrency has drastically dropped, while the price has grown. 

Not coincidentally, this bitcoin outflow coincided with the price increasing from $10,000 to $65,000. From May 2021 onwards, the outflow stopped, BTC on Coinbase went back up, while the price dropped.

Now, bitcoin are flowing out again.

Looking at the graph, comparing it to the price of Bitcoin, there seems to be an inverse correlation: as the reserves on Coinbase increase, the price decreases, whereas it increases as the reserves decrease.

This is why this is considered a bullish signal which could be a prelude to a rise in Bitcoin’s price.

BTC reserves on exchanges

Moreover, CryptoQuant notes, the analysis made for Coinbase can be extended to other exchanges. In fact, the chart, just like the one linked only to Coinbase, shows the inverse correlation between price and reserves. Maximum peaks in reserves that correspond to price collapses. Conversely, with price spikes, the reserves fall dramatically.

This also confirms the deflationary nature of BTC, whose price can rise as the supply in circulation decreases. It is worth mentioning that currently over 18 million BTC have been mined, and Satoshi Nakamoto’s protocol has imposed a cap at 21 million.

The relationship between reserves on exchanges and investors

However, not everyone agrees with the bullish thesis related to Bitcoin reserves. On BitcoinTalk, some point out that Glassnode and Quant’s analysis is not indicative of price predictions, but something else: people who buy BTC prefer to keep them in their wallets rather than on exchanges.

The reason is simple: in their own wallet, they have full control of the assets, whereas holding them on exchanges can always be a risk, as the cases of hacked Coinbase accounts show.

The price of Bitcoin

Indeed, the price of Bitcoin has risen again in recent days and is now one step away from $50,000.

BTC is still a long way from the all-time high of $65,000 set in April, but this analysis shows that there is a good chance that Bitcoin will return to above $50,000 before heading straight for the previous record.


Eleonora Spagnolo

Journalist passionate about the web and the digital world. She graduated with honours in Multimedia Publishing at the University La Sapienza in Rome and completed a master's degree in Web and Social Media Marketing.

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