This triggers an analysis suggesting the possibility of increased selling pressure on major digital assets.
Possible Reasons, Fund Selling Preparation
Cryptoquant analyst Cryptoonchain reported on Friday that the increase in Bitcoin exchange balance points to three possible scenarios.
The analyst proposed three possibilities for the increasing reserves: immediate selling, margin trading collateral, and institutional portfolio rebalancing. He mentioned that the "funds waiting to sell" scenario best matches the current market situation.
Cryptoonchain emphasized the historical precedent for these movements. "Historically, a notable surge in inflows that does not align with strong buying demand has often preceded periods of short-term selling pressure," the analyst wrote.
BTC Inflow Surge, Outflow Decrease
Concerns are growing due to withdrawal data that does not offset the increase in deposits.
"The recent increase in net inflows (inflows exceeding outflows) further reinforces this signal, confirming that Binance's total Bitcoin balance is increasing without being offset by withdrawals," Cryptoonchain added. This amplifies the net increase in reserves as the amount of Bitcoin leaving the exchange decreases.
This imbalance in supply and demand could increase market volatility. "Without equivalent demand, this setup could tilt the market towards short-term downward volatility," Cryptoonchain said. "Especially if large holders are preparing to sell or hedging exposure through derivatives."
Bitcoin price dropped about 4% on Thursday night, falling from $121,000 to $117,000 after the release of the July US Producer Price Index (PPI). This decline was twice as steep as Ethereum's (ETH) drop during the same period.
It is rare for the world's largest cryptocurrency to show more than twice the volatility of the second-largest cryptocurrency. This is also true in response to bearish news that negatively impacts market liquidity.
