Bitcoin Volatility Looms as Exchange Reserves Plunge and Dormant Coins Awaken

• Bitcoin is still trading around $84,000, but exchange balances fell to over 15,000 BTC in the past week.
• Short-term holders with approximately 170,000 BTC are now actively trading, which is typical before large BTC price fluctuations occur.

Bitcoin ($BTC) is trading above $84,000, but various on-chain signals suggest the market may be on the verge of a significant change . As reported by the popular crypto analyst Ali Martnez, over the last week, more than 15,000 BTC were withdrawn from centralized exchanges, decreasing the supply of available assets and limiting the liquidity in trades.

The exchange reserves have continued to decrease from approximately 2.438 million BTC on April 13 to 2.423 million BTC. This usually precedes the bullish trend as the number of coins available for sale in the market decreases. But exchange outflows alone do not imply outward pressure on its own.

Meanwhile, daily activity in Bitcoin reaches significant levels, with almost one million active addresses, according to CryptoQuant. While this is a stable number of networks, there aren’t signs of increased activity as exhibited during a significant breakout.

This is especially the case now that the flattening address trend provides traders with signals they can use to gauge a given sentiment. In any case, these sorts of price booms can falter without any increase in the number of active participants or new foreign investment.

Dormant Holders Trigger Market Alarm

The activity of short-term holders was a major concern. This means that recent activities have seen the movement of funds that were amassed between three to six months ago, at least 170K Bitcoins. Historically, such wallet cohorts have specified significant turning points for Bitcoin as an asset.

CryptoQuant analyst Mignolet noted that the activity of this group has been a previously bearish signal that often presages both up and down moves. The current movement is the largest it has seen since the episode in early 2021, which stoked concerns that the price may soon break its complacency and plunge.

Analyzing the “Spent Output Age Bands” chart, it is possible to observe a significant increase in BTC movements that occurred in 3–6 months prior to the identified turning points. However, it should be noted that these movements do not necessarily correspond to price improvements. For instance, corrections were conversely noted in May 2021 and November 2021 for the same reason.

Such a pattern of accumulation usually indicates traders adopting long-term holding and reactivating dormant coins, which might be done during macroeconomic events to cash in profits or rebalance.

Trump Targets the Fed as Traders Brace for Impact

President Trump’s latest attack on the head of the Federal Reserve, Jerome Powell, creates even more ambiguity in the market. Trump criticized Powell and said he did not do enough to reduce the interest rates and should be fired. The attack occurred soon after Powell explained how the President’s threatened tariffs could deepen the economic volatility.

Despite the political noise remains quite steadfast, traders are keenly observing the situation. The moderate incoming flow of stablecoins and the slowdown in the growth of Bitcoin’s realized capitalization imply the absence of fresh capital coming into the market.

However, in the last week, bitcoin has risen by 8%. A breach of this level can signal a continuation toward the upside, as the bulls could regain their optimism if Bitcoin’s price surges past $90,000. However, the declining exchange reserves, increasing activity of short-term holders, and external economic signals speak for volatility in the near future.