Short-term holder trading activity, not German gov't, driving bitcoin exchange reserves surge: CryptoQuant

Bitcoin exchange reserves have increased over the past week, according to data from CryptoQuant. CryptoQuant analysts dismissed German government exchange transfers as the cause; however, they attributed the rise to increased trading activity by short-term holders on centralized exchanges instead.

Thursday's increase in bitcoin exchange reserves reverses a sharp 2.8% decline in the amount of the digital asset on exchanges that occurred last Friday and also comes as a sudden change to the overall 9.5% decline in exchange reserves that has been happening since the beginning of the year.

According to CryptoQuant data, on Saturday, bitcoin exchange reserves were 2,767,490; however, since then they have increased 0.5% to 2,779,197. This trend increases the liquid supply of bitcoin at a time when investors are sensitive to supply-side stresses from exchange transfers of seized bitcoin from the German government's digital wallet and the distribution of bitcoin to Mt. Gox creditors.

Bitcoin exchange reserves have increased sharply this week. Image: CryptoQuant.

Increase in short-term holder trading activity

CryptoQuant Head of Research Julio Moreno said the increase in total bitcoin reserves on exchanges is mostly due to higher reserves at the Binance, OKX and Bitfinex centralized cryptocurrency exchanges.

However, Moreno dismissed the notion that the reserve increase was related to exchange transfers from entities like the German government's bitcoin wallet.

"This could instead be related to higher trader activity as most of the bitcoin inflows are from short-term holders and it doesn’t seem related to the German government seized bitcoin," Moreno told The Block.

According to Arkham data, the German government now has fewer than 10,000 bitcoin remaining on its digital wallet from an original haul of over 50,000 confiscated bitcoins seized from the now-defunct film piracy website Movie2K in January. Arkham cites transfers to centralized exchanges such as Kraken, Bitstamp and Coinbase. Data from Arkham shows that in the last hour alone, the German government sent 2,000 bitcoins to Flow Traders, a cryptocurrency market maker.