Beware of Deceptive Exchange Reserves in On-Chain Analysis
On-chain analysis relies heavily on exchange reserves to gauge market trends and sentiment. However, these metrics are not always reliable and can be misleading if not interpreted correctly.
Avoid making conclusions based on sharp changes in balance on a single platform, as they may simply indicate technical wallet migrations rather than real demand or sales.
For medium- and long-term market assessment, exchange reserves are more reliable. A strong bullish signal occurs when stablecoins enter exchanges while BTC and ETH are withdrawn from them.
On-chain analysis is the study of blockchain data to understand how market participants behave. It helps assess supply and demand, spot large coin movements, track wallet activity, and check if the market picture matches on-chain actions.