According to the on-chain market analysis firm Glassnode, Bitcoin reserves on exchanges in August fell to a level unseen since June 2019. This indicates that retail investors are not intending to to sell their bitcoin.

When retail investors move to sell their bitcoin holdings, they typically send their funds to exchanges, which leads to an increase in bitcoin reserves held by exchanges. 

A decline in exchange reserves indicates that there is less appetite to sell bitcoin at the current price point, at least among individual investors.

Bitcoin balances on exchanges. Source: Glassnode

On-Chain Data Mostly Optimistic for Bitcoin in the Medium-Term

In the medium-term, on-chain analysts generally remain optimistic about Bitcoin. Several data points including exchange reserves, “HODLing” activity, and the Bitcoin network’s growing hashrate show a positive market sentiment.

In July 2019 and February 2020, when the Bitcoin price reached local peaks at $14,000 and $10,500 USD, exchange bitcoin reserves hit 2.85 million BTC and 2.95 million BTC respectively.

As of August 19th, the number of bitcoin on exchanges hovers at 2.63 million, which is substantially lower than during previous price peaks. Glassnode researchers wrote:

“The decline of #BTC exchange balances signals reduced selling pressure. Currently 2.6M BTC are being held on exchanges. Significantly lower than the last time $BTC hit a local top a year ago (2.8M), and lower than before the sell-off in March (2.9M).”

But it is critical to consider that there are alternative scenarios that could override bitcoin reserves on exchanges. Miners selling newly mined bitcoin and exchanges selling fees received in bitcoin presents two potential sources of external selling pressure on Bitcoin.

If miners and exchanges started to sell their holdings, increased selling pressure on Bitcoin could follow, which could cause retail investors to amplify the selling pressure.

There Is More Positive Data

Other on-chain data points also hint at a prolonged uptrend for Bitcoin. On August 7th, Glassnode’s chief technical officer Rafael Schultz-Kraft said the Bitcoin Short-Term Holder MVRV indicator suggests the start of a new bull phase.

The Bitcoin Short-Term Holder MVRV. Source: Glassnode

By analyzing Bitcoin addresses with transaction outputs that are less than 155 days old, the indicator assesses the behavior of short-term investors. Schultz-Kraft explained:

“Bitcoin Short-Term Holder MVRV is a great indicator. Coming from below 1 and reaching the current level (1.25), has previously marked the start of bull markets. Crucial to watch that we stay above 1 here – as long as that's the case, I remain bullish.”

The confluence of positive on-chain metrics and Bitcoin's recent rally are leading analysts to gear bullish in the medium-term.

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