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According to data from CryptoQuant, currency reserves increased last week. CryptoQuant analysts dismissed the German government’s currency transfers as the cause, but instead explained that the increase was due to increased trading activity by short-term holders on central exchanges.
The increase in Bitcoin exchange holdings on Thursday was a reversal from the 2.8% plunge in the digital asset’s value on exchanges last Friday, and a sharp reversal from the 9.5% decline in overall exchange holdings that has been ongoing since the start of the year.
According to CryptoQuant data, Bitcoin exchange holdings on Saturday were 2,767,490, but have since increased by 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 such as the transfer of Bitcoin confiscated from digital wallets by the German government to exchanges and the distribution of Bitcoin to Mt. Gox creditors.
Bitcoin exchange holdings have grown dramatically this week. Image: CryptoQuant.
Increased short-term holder trading activity
Julio Moreno, head of research at CryptoQuant, said the increase in total exchange Bitcoin holdings was primarily driven by increases in holdings on centralized cryptocurrency exchanges such as Binance, OKX, and Bitfinex.
However, Moreno dismissed the notion that the reserve increase was related to currency transfers from institutions such as the German government’s Bitcoin wallet.
“Instead, it may be related to increased trading activity, as most of the Bitcoin inflows appear to be coming from short-term holders and are unrelated to the German government’s seizure of Bitcoin,” Moreno told The Block.
According to Arkham data, the German government has less than 10,000 bitcoins remaining in digital wallets out of the more than 50,000 bitcoins seized from the movie piracy website Movie2K, which was shut down in January. Arkham cites transfers to centralized exchanges such as Kraken, Bitstamp, and Coinbase. In the past hour alone, the German government sent 2,000 bitcoins to cryptocurrency market maker Flow Traders, according to Arkham data.
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