On-chain data suggests that Ethereum is in a better long-term growth position than Bitcoin and could therefore see gains even after BTC’s rally ends.
The Ethereum Exchange Reserve has not risen that much yet
As one analyst pointed out in a CryptoQuant post, investors have recently been depositing Bitcoin on exchanges. The indicator of interest here is the “Exchange Reserve”, which measures the total amount of a cryptocurrency currently stored in the wallets of all centralized exchanges.
When the value of this metric decreases, it means that the asset in question is about to exit the stock exchanges. In general, this trend can be bullish for the price on a longer duration as it suggests that investors may be accumulating.
On the other hand, the declining value of the indicator implies that the holders are depositing their coins on these platforms. Since one of the main reasons investors would transfer their holdings to exchanges is for selling purposes, such a trend can prove to be bearish for the cryptocurrency’s price.
Well, here is a chart showing the development of the Bitcoin exchange reserve over the past few weeks:
The value of the metric seems to have been sharply going up in recent days | Source: CryptoQuant
As shown in the chart above, bitcoin exchange reserve declined earlier in the month as the price fell below $20,000. This suggests that there was some fresh buying at these lows.
However, since the rally resumed, the value of the indicator has also reversed its trend and has risen sharply along with the price. This could indicate that holders could rush to sell their coins while the profit-taking opportunity remains.
However, it is difficult to say how many deposits are made for this purpose, since the indicator used here measures the reserves of spot platforms (which investors use to sell and buy) and derivatives exchanges.
Below is another chart, this time for the Ethereum exchange reserve.
Looks like the value of the metric has seen a slight increase recently | Source: CryptoQuant
From the chart, the Ethereum exchange reserve, similar to Bitcoin, has crashed around the recent lows and the metric has also trended higher during the recent price surge.
However, the pace at which the ETH deposits have taken place varies. BTC inflows have been rapid, with the total number of coins inflowing during this surge surpassing the amount withdrawn during the lows. However, ETH’s FX reserves have been growing slowly and are still far from the levels seen prior to the recent lows.
This could indicate that Ethereum is not yet under selling pressure to the same extent as Bitcoin. Because of this, the quant believes that even after the BTC surge ends, another strong surge in ETH is to be expected.
At the time of writing, Ethereum is trading around $1,800, up 3% over the past week.
ETH has surged during the last few hours | Source: ETHUSD on TradingView
Featured image by Kanchanara on Unsplash.com, charts by TradingView.com, CryptoQuant.com