Spot And Derivative Reserve Shoot Up

On-chain data shows the Bitcoin spot and derivative exchange reserves have each shot up recently, an indication that could possibly be bearish for the value.

Bitcoin Spot And Derivative Reserves Register Growth

As identified by an analyst in a CryptoQuant post, the open interest and the funding rates are also heating up within the BTC market. The “exchange reserve” is an indicator that measures the whole amount of Bitcoin that investors are depositing into wallets of centralized exchanges straight away.

This metric has two versions; one is for the spot exchanges, while the opposite is for the derivative platforms. Often, investors deposit to identify exchanges for selling purposes, so a rise within the reserves of those platforms can suggest selling pressure is rising out there.

And as holders use derivative exchanges for opening positions on the futures market, an increase on this reserve can result in higher volatility (the effect on the value may be in either direction).

Now, here’s a chart that shows the trend in these Bitcoin exchange reserves during the last month:

The values of all of the metrics appear to have seen an increase in recent days | Source: CryptoQuant

As displayed within the above graph, each the spot and derivative exchange reserves have increased in value recently, suggesting that investors have been making deposits to those platforms. The increased spot reserves suggest an elevated selling pressure out there, while the derivative reserves imply an overheated futures sector.

The chart also includes data for 2 other metrics, the open interest, and the funding rates. The “open interest” is an indicator that measures the whole amount of futures positions currently open on derivative exchanges. This metric takes under consideration each short and long contracts.

The graph shows that this metric has also trended up recently, further suggesting that the futures market is currently overheated. The opposite indicator, the “funding rates,” tells us whether there are more shorts or longs out there.

The Bitcoin funding rates are favorable now, implying that the longs are overwhelming the shorts. Generally, whichever way this metric swing tells us which of those contract holders is more susceptible to a liquidation squeeze.

Up to now, there hasn’t been any long squeeze out there, but quite a brief squeeze as the value has been capable of sustain the momentum. There have been some high liquidations throughout the past day which will have helped calm the overheated futures marketplace for now, but since there’s increased selling pressure on the spot exchanges, BTC remains to be in danger for a short-term pullback.