Bitcoin's Exchange Reserves Drop 29% Since 2021 Bull Run, Indicating Undervaluation
1min read Bitcoin (BTC) may still be undervalued based on several on-chain metrics, according to a recent analysis by CryptoQuant. On-chain analyst BorisVest highlighted that data suggests bullish sentiment remains intact for the leading cryptocurrency.
BorisVest pointed to two key on-chain metrics suggesting that BTC’s current price might be below its fair value. First, the analyst highlighted the decline in Bitcoin’s exchange reserves. According to recent data, btc exchange reserves – the amount of BTC available on cryptocurrency exchanges – are currently hovering around 2.43 million BTC, a sharp decline from the 3.40 million BTC on exchanges during the 2021 bull run. The analyst noted that the Bitcoin exchange reserve data shows that Bitcoin is being withdrawn from exchanges after seven years. The fact that Bitcoin is not readily available for sale suggests it is being held for the long term. A decrease in Bitcoin supply supports a potential price increase.
To explain further, a decline in BTC exchange reserves means fewer coins are available for sale on centralized exchanges. This suggests that investors are holding rather than selling – a signal of growing confidence and potential undervaluation, as supply tightens while demand may rise.
Further, BorisVest pointed to the Bitcoin Stablecoin Supply Ratio (SSR), which currently stands at 14.3. This suggests that even if BTC falls further, there is enough purchasing power among potential investors to prevent a major price decline. The analyst explained that the ssr increases as the BTC price rises, indicating reduced purchasing power, which may signal that BTC is overvalued at prevailing market prices. The following chart shows that the SSR has not yet reached its 2021 levels – around 34 – hinting that BTC may be undervalued at its current price.
Crypto analyst Titan of Crypto shared an interesting observation regarding the declining USDT dominance on the weekly timeframe. The analyst noted that a hidden bearish divergence may be forming, which could indicate an early signal of risk-on sentiment returning to the market. A bearish divergence on the USDT dominance chart suggests that investors are becoming less defensive, possibly rotating out of stablecoins and back into risk-on assets like BTC and altcoins. It often signals improving market sentiment and a potential bullish phase for crypto.
Ask Aime: Is Bitcoin undervalued based on on-chain metrics?
Meanwhile, the Bitcoin weekly Relative Strength Index (RSI) recently broke its prolonged downtrend, sparking hopes for a potential price recovery, with some analysts targeting prices beyond $100,000. Additionally, exchange net flow data suggests that a BTC rally may be closer than most investors anticipate. At press time, BTC is trading at $85,550, up 0.5% in the last 24 hours.
