Why aren’t BTCs leaving exchanges a bullish sign?

The crypto analyst Nicholas Merten noted that BTCs leaving the crypto-exchanges were by no means an optimistic sign, as it might seem at first glance.

Why aren’t BTCs leaving exchanges a bullish sign, what has changed?

Merten commented on the metrics of the Glassnode analytical platform, which shows that BTC’s supply on short exchanges is slowly declining. Outwardly, BTC’s declining offer on crypto-exchanges may seem bullish.

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.

However, the analyst points out that the metric does not include futures and options markets. It suggests that more and more cryptocurrencies are in fact only entering the derivatives market, without exerting upward pressure on the underlying asset.

Merten says that derivatives are sucking capital out of real crypto markets, “disorienting” space and putting overwhelming pressure on the side of buying BTC and other digital assets. According to the cryptostrategist, the shift in traders’ preferences from spot markets to derivatives markets may be part of what is behind the poor performance of crypto markets.

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.

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