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Bitcoin Exchange Supply Drops to 5-year Low – Here’s How BTC Price Could React

3 mins
Updated by Ryan Boltman
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In Brief

  • Bitcoin (BTC) price has struggled since losing the $30,000 support in late July 2023, before a flash crash on Aug 17 compound the bearish headwinds. 
  • Bitcoin deposits in Exchange wallets has now dropped to 2.05 million BTC, it lowest since January 2018. 
  • If the market sentiment remains neutral, MVRV data suggests majority of BTC holders will likely hold out for a $28,000 retest before selling.
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Bitcoin deposited in exchange wallets has now dropped to 2.05 million BTC, its lowest since January 2018. With the overall crypto market sentiment trending neutral, here’s how Bitcoin price could react in the coming days. 

Bitcoin’s (BTC) price has struggled since losing the $30,000 support in late July 2023, before a flash crash on Aug 17 compounded the bearish headwinds. Rather than fold, on-chain data reveals BTC holders have been moving their assets off exchanges, presumably for long-term self-custody

Bitcoin Investors Are Holding For Future Gains 

Bitcoin deposited in Exchange wallets has now dropped to a 5-year low, according to on-chain data compiled by Cryptoquant. The chart below depicts that Bitcoin Exchange Reserves have dropped to 2.05 million BTC as of August 24.

Zooming out, the data shows that BTC Exchange reserves have not dropped this low since January 2018. 

How Bitcoin (BTC) Price Could React | Exchange Reserves, Aug 2023
How Bitcoin (BTC) Price Could React | Exchange Reserves, Aug 2023 | CryptoQuant

Exchange Reserves track real-time changes in investors’ total BTC balances in recognized crypto exchange wallets. Notably, Bitcoin Exchange reserves dropping to 2.05 million coins means that investors have now withdrawn 480,000 BTC in August 2023 alone.   

When Exchange Reserves decline during a market downturn, it signals that investors are looking to HODL for future gains rather than bail out. If it persists, Bitcoin price could react with a significant price surge when macro drivers and overall global crypto market sentiment flip bullish again.

The Holding Could Persist for a While Longer 

Furthermore, the Market Value to Realized Value (MVRV) ratio, which tracks BTC holders’ net financial position, confirms that they could hold out for a while longer. 

As shown in the MVRV chart below, most investors who bought BTC in the last 30 days could make 6.4% if they sell early.

How Bitcoin (BTC) Price Could React | MVRV, Aug 2023
How Bitcoin (BTC) Price Could React | MVRV, Aug 2023 | Source: Santiment

Historical trends suggest that the current investors will likely HOLD until they break even around the $28,000 range. 

In summary, with BTC prices currently hovering around the $26,000 range, most holders are unlikely to start making a drastic influx of BTC into exchange deposits. And if the exchange supply continues to decline, Bitcoin price could react to an uptick in demand with double-digit percentage gains. 

BTC Price Prediction: Possible Rebound Toward $28,000

The indicators above suggest Bitcoin price could react to a growth in market demand by reclaiming the $28,000 level.

The In/Out of Money Around Price data depicts the current BTC holders’ purchase price distribution and supports this prediction.  

It, however, highlights that Bitcoin price will face initial resistance around $27,000 territory. As shown below, the 1.34 million holders had bought 735,840 BTC at the maximum price of $27,200. If they book profits early, the BTC price could enter a bearish reversal. 

But if the bulls can push past that resistance, Bitcoin price could react with a move toward $28,000. 

Bitcoin (BTC) Price Prediction | IOMAP data, Aug 2023
Bitcoin (BTC) Price Prediction | IOMAP data, Aug 2023, Source: IntoTheBlock

Yet, the bears could invalidate that Bitcoin price prediction if it drops below $25,000. Although 1.51 million addresses had bought 671,660 BTC at the minimum price of $25,700. But if they keep HODLing as predicted, BTC could enter an early rebound. 

But if that support level caves, Bitcoin’s price could drop below $25,000.

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Disclaimer

In line with the Trust Project guidelines, this price analysis article is for informational purposes only and should not be considered financial or investment advice. BeInCrypto is committed to accurate, unbiased reporting, but market conditions are subject to change without notice. Always conduct your own research and consult with a professional before making any financial decisions. Please note that our Terms and ConditionsPrivacy Policy, and Disclaimers have been updated.

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Ibrahim Ajibade
Ibrahim Ajibade Ademolawa is an experienced On-chain research analyst who began his career in Commercial Banking. He has worked with several Web3 startups and financial institutions —analyzing technical concepts and spectacular events that link the DeFi and TradFi worlds. He holds a Bachelors’ Degree in Economics and is currently pursuing an MSc. in Blockchain & Distributed Ledger Technologies.
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