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Bitcoin exchange reserve data continues to paint a bullish long term picture even as Bitcoin’s price dipped below $113,000 after the latest market pullback.
Traders reacted to weekend volatility triggered by new tariff announcements sending Bitcoin down roughly 10% in the past week. The cryptocurrency has traded between $109,883 and $125,023 now 9% below its Oct. 6 record high of $126,080.
Trading activity cooled off with daily volume down 25% to around $69 billion. According to CoinGlass, derivatives volume inched up by 0.14% to $109.97 billion while open interest dropped 1.8% to $73.36 billion. This combination of higher volume and falling open interest suggests traders are closing leveraged positions a healthy Bitcoin exchange reserve reset phase following a volatile week.
An Oct. 14 analysis by CryptoQuant contributor Chairman Lee revealed that the Bitcoin exchange reserve has fallen to its lowest level in more than a decade, with just around 2.4 million BTC held on centralized platforms. This is a dramatic decline from over 3.5 million BTC in 2020, marking one of the most consistent withdrawal patterns in Bitcoin’s history.
Lee emphasized that a shrinking Bitcoin exchange reserve typically reduces selling pressure often preceding strong price recoveries. Similar declines in exchange holdings were observed before the 2020–2021 bull run suggesting that the current accumulation trend could set the stage for another surge.
“As long term holders, institutional investors and ETFs continue moving assets into cold wallets, the Bitcoin exchange reserve will tighten further,”
Lee explained adding that reduced liquidity could support future upside momentum.
XWIN Research Japan noted in its latest Bitcoin exchange reserve report that the recent liquidation wave wiped out roughly $19 billion in leveraged positions following the U.S.-China tariff news. Bitcoin briefly fell to $104,000 before stabilizing echoing previous cycles where major liquidations reset the market structure.
“Each time the Bitcoin exchange reserve shrinks while leverage clears out, spot demand eventually returns,” XWIN analysts wrote.
“This combination of lower exchange balances, ETF inflows and institutional accumulation supports the view that another recovery phase is underway.”
Onchain indicators strengthen this narrative. Funding rates have normalized, and the adjusted SOPR (aSOPR) a metric tracking overall profitability has climbed above 1.0, signaling a transition from panic selling to accumulation. Historical trends suggest that every major Bitcoin exchange reserve contraction has coincided with the early stages of a rebound.
Technically, Bitcoin remains in a consolidation zone. The relative strength index (RSI) stands at 44 indicating neutral momentum. Most short term moving averages (10–50 day) show mild selling pressure while momentum and MACD readings lean slightly bearish.
The 200 day moving average near $108,000 remains a strong support level as long as Bitcoin stays above it, the broader uptrend remains intact. A break above the $116,000–$118,000 zone could confirm renewed strength and push the price back toward $125,000. Conversely, a drop below $110,000 could test $105,000 next.
Despite short term volatility, the declining Bitcoin exchange reserve underscores growing conviction among long term holders hinting that this dip may ultimately strengthen the market’s next expansion phase.
