Bitcoin Exchange Reserves Fall To Lowest Levels on Record: The Bullish Signal Most Traders Are Missing

Overview

Bitcoin’s exchange reserves have plummeted to their lowest levels on record, even as the cryptocurrency holds above $90,000. This development occurs ahead of a significant FOMC meeting that could influence the future direction of risk assets. Despite the price fluctuations, on-chain indicators suggest a contrasting narrative of long-term confidence among Bitcoin holders.

Exchange Reserves Decline

A recent report from XWIN Research Japan indicates a notable decrease in Bitcoin’s exchange reserves throughout 2025. The total amount of Bitcoin held on centralized exchanges has dropped to 2.76 million BTC, marking one of the lowest points ever recorded. This decline is particularly striking given the backdrop of a steep sell-off seen in November and December, where exchange balances did not increase as prices fell. Instead, they continued to decline, suggesting that investors are not liquidating their holdings during periods of weakness.

The data highlights a significant trend: as Bitcoin’s price approached the $90,000 range, investors opted to withdraw their BTC into long-term custody rather than selling it. This behavior indicates a level of confidence among holders, contrasting with the typical reaction seen during price corrections, where inflows to exchanges usually spike as investors look to exit their positions.

Structural Implications

The reduction in exchange reserves has critical implications for the Bitcoin market. With fewer coins available on centralized exchanges, the liquid supply of Bitcoin is tightening. This situation is driven not by short-term speculators but by long-term holders and institutional entities who are moving BTC into self-custody or cold storage. Historically, significant price declines prompt a surge of inflows to exchanges as investors prepare to sell; however, the current trend suggests a different narrative, where long-term buyers are actively accumulating BTC despite market volatility.

This divergence between short-term price movements and on-chain behavior indicates underlying strength in the market. As Bitcoin’s reserves approach historic lows, the potential for a future supply shock increases. Although the spot market performance appears weak, on-chain metrics are beginning to show bullish signs, indicating that the groundwork for a major upward trend may already be taking shape.

Bitcoin’s Price Action

On the technical front, Bitcoin’s price has been attempting to stabilize following a corrective phase. Currently, BTC is trading around $90,437, just above a key dynamic support level represented by the 200-day moving average. The recent bounce from the $87,000–$88,000 range suggests that buyers are defending this zone. However, the market remains fragile, particularly as the price continues to trade below both the 50-day and 100-day moving averages, which are currently sloping downward.

The price chart reveals a shift in momentum. After maintaining higher lows for several months, Bitcoin broke its upward trend in late November, leading to a rapid decline toward the high $80,000 range. Increased volume during this decline indicates stronger selling pressure, yet the subsequent candles show diminishing sell volume, suggesting exhaustion among short-term sellers. For a significant recovery to occur, Bitcoin must reclaim the $95,000–$97,000 area, where previous support has turned into resistance.

From author

The current market dynamics surrounding Bitcoin present a complex picture. While price action may indicate uncertainty, the underlying trend of decreasing exchange reserves suggests that long-term holders are confident in Bitcoin’s future. This behavior merits close attention as it may signal a shift in the market’s structure, potentially leading to significant price movements in the near future.

Impact on the crypto market

• Decreased exchange reserves indicate a tightening supply of Bitcoin, which could lead to upward price pressure.
• Long-term holders are accumulating BTC, suggesting confidence in Bitcoin’s value despite short-term volatility.
• The divergence between price action and on-chain behavior highlights potential structural strength in the market.
• The upcoming FOMC meeting may serve as a catalyst for further market movements, with both short-term traders and long-term holders closely watching developments.
• The potential for a future supply shock increases as exchange reserves approach historic lows, which may attract more attention from institutional investors.