Will Recent Binance Events Trigger This Historical Bitcoin Bull Run Signal?

The recent events at cryptocurrency exchange Binance could trigger the next Bitcoin bull run if this pattern continues to form.

As explained by an analyst in a CryptoQuant Quicktake post, the BTC exchange reserve ratio for US versus off-shore platforms has followed a specific pattern during past bull markets of the asset.

The “exchange reserve ratio” here refers to an indicator that compares the exchange reserves of any two platforms or group of platforms. The exchange reserve is the total amount of Bitcoin sitting in the wallets of the exchange/group in question.

In the context of the current discussion, the exchange reserve ratio between the US-based exchanges and foreign platforms is of interest. The trend in this metric can tell us about which type of exchanges users prefer to use.

When the ratio’s value declines, the off-shore exchanges gain steam as investors deposit their coins to them faster than to the US platforms (alternatively, they are withdrawing at a slower pace).

On the other hand, an increase implies the dominance of the American exchanges is going up as their exchange reserve is growing relative to that of the global platforms.

Now, here is a chart that shows the trend in the Bitcoin exchange reserve ratio for these two sets of exchanges over the last few years:

In the graph, the quant has highlighted the two phases that the Bitcoin exchange reserve ratio for these platforms appeared to have followed during the last two bull runs.

In the first phase (marked in green), the indicator rises while the cryptocurrency goes through a buildup period for the bull rally. This suggests that large entities start participating in the American exchanges ahead of the bull run.

Once the bull run starts properly, the indicator’s value starts sliding down as investors withdraw their coins from these platforms again (the red box in the graph).

From the chart, it’s visible that the Bitcoin exchange reserve ratio for US vs. foreign exchanges was in a continued decline since the start of the bear market but has recently shown signs of turning around.

The indicator has only registered a small increase so far, so it’s hard to say if it’s a sign of a trend taking shape or just a temporary deviation. Whatever the case, though, a development has happened in the Bitcoin market that can tip the favor towards the American platforms regardless.

Binance, the largest cryptocurrency exchange based on trading volume, has seen a leadership change following Changpeng Zhao’s resignation. The instability has kickstarted outflows from the exchange, while US-based Coinbase has enjoyed inflows.

Thus, this may be the event that leads to a proper reversal in the BTC exchange reserve ratio. “If the recent regulations on CZ and Binance lead to an increase in the percentage of Bitcoin held on US exchanges, we will be ready for the next bull market,” notes the analyst.

Bitcoin has once again been trying to breach the $38,000 level today, as the chart below shows.