Merten: BTC Leaving Exchanges Moves To Derivatives Market – Not Bullish Signal
A prominent crypto analyst and trader Nicholas Merten looks into the implications of Bitcoin (BTC) leaving exchanges, and how it should be interpreted.
In a recent video session, Merten looks into data from blockchain tracker Glassnode which indicates that Bitcoin supply is slowly going down on crypto exchanges.
While it may seem that the declining supply of BTC on crypto exchanges is a bullish signal, the analyst points out that the metric doesn’t include the futures and options markets.
According to Merten, an increasing amount of crypto is actually just going to derivatives market where it gets traded without putting upward pressure on the underlying crypto asset.
“Many people look at the decline here, throughout 2020 and 2021, the continuous decline and low-levels that we’ve seen, cutting a couple percentage points off, as a really bullish sign. That the intuitions or other players are buying large chunks of Bitcoin and they’re storing it in cold storage where they’re taking it off the exchanges and holding it for the long term. The real institutional players: the hedge funds the family funds… Just swallowing up the Bitcoin…
Well, not to say that stuff isn’t going on, but it is not the main reason for this decline.”
According to the analyst, derivatives are taking capital away from the real crypto markets, “disorienting” the space and setting an underwhelming buy-side pressure on BTC and other crypto assets.
The shift of traders’ preference from spot to derivatives markets could be part of what’s behind the underwhelming performance of the crypto markets, Merten says.
“This is what’s really disorienting markets. Because that exchange outflow… that everyone is saying is bullish, is really sucking in Bitcoin into derivatives markets. All those new users who have Bitcoin or in this case dollars or some form of value, they’re going to the derivatives platforms. Their buy-side pressure is now no longer going to the spot exchanges.”
