According to the on-chain data pointed out by an analyst in a CryptoQuant post, Bitcoin reserves in exchanges have lost another 50k Bitcoin over the last week and could be a bullish indicator.

The “all exchanges reserve” is an on-chain indicator that aggregates the total amount of Bitcoin stored on centralized exchanges. 
Typically when the number of Bitcoin on exchanges is rising, it means that investors are transferring their Bitcoin from external wallets to the exchanges for selling purposes which is a bearish indicator for price action.

The opposite is true too, in that whenever the number of Bitcoin on exchanges is decreasing, typically investors are transferring their Bitcoin to external wallets for long-term storage. If this trend remains over a prolonged period of time, it can be bullish for the price of Bitcoin as the behavior suggests that investors are accumulating.

The exchange reserve has been perceived as the “selling supply” of the coin. Since it’s been shrinking for a while now, the effect on the price should be relatively positive because of its finite supply, and increasing demand. 

Some refer to the increased demand as creating a “supply shock” in the market. However, there’s new data that suggests that the exchange reserve is no longer the main source of the “selling supply” since coins exiting from exchanges have instead been side shifted into legacy investment products such as ETFs.

Even if the exchange reserve may have been side shifted into ETFs or other investment products, ETFs wouldn’t do so without the conviction that there is a large demand for it. Ultimately the indicator is trending in the direction that has historically been bullish for Bitcoin.

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