On-chain data shows that bitcoin derivatives exchange reserves have increased recently, a sign that the crypto may face greater volatility in the near future.
Bitcoin derivatives exchange Reserve observes uplift over the past two days
As pointed out by an analyst in a Cryptoquant post, conditions are escalating in the BTC market that could lead to higher volatility in the price.
“Derivatives Exchange Reserve” is an indicator that measures the total amount of bitcoins currently sitting in the wallets of all derivatives exchanges.
When the value of this metric rises, it means that investors are depositing their coins in these exchanges right now. Since moving BTC on derivatives typically results in increased leverage, such a trend can result in higher volatility in the price of the crypto.
On the other hand, the value of a declining indicator means that coins are exiting derivatives exchanges as holders are withdrawing them. Such a trend could precede a more calm BTC price.
Now, here’s a chart that shows the trend in bitcoin derivatives exchange reserves over the past few weeks:
The value of the metric seems to have climbed up in recent days | Source: CryptoQuant
As you can see in the graph above, bitcoin derivatives exchange Reserve has seen some upward movement over the past few days. This shows that the leverage in the market is now increasing.
The chart also includes data for the average price of BTC transaction fees (in USD), and this metric also appears to have seen a spike in the previous day, indicating that the market has made some major moves.
Below is another graph, this time with the trend of BTC funding rates:
The funding rates have gone up over the past day | Source: CryptoQuant
As is evident from the chart, funding rates have jumped to positive values with this increase in derivatives reserves.
This means that investors sending coins to these exchanges have opened long contracts, thus shifting the market equilibrium to a longer dominant environment.
In the past, the combination of positive funding rates with high derivative reserves has usually meant higher near-term volatility for bitcoin, with the price usually falling.
btc price
At the time of writing, the price of bitcoin is floating around $20k, down 8% over the past week.
Looks like the value of the crypto has been moving sideways during the last few days | Source: BTCUSD on TradingView
Featured image from Yiğit Ali Atasoy on Unsplash.com, charts from TradingView.com, CryptoQuant.com