• Bitcoin saw a price recovery after significant exchange outflows reduced selling pressure.
• The number of new Bitcoin addresses has increased, reflecting growing retail interest.

Bitcoin’s [BTC] price movements over recent days have drawn considerable attention, particularly as the cryptocurrency experienced both a sharp decline and a subsequent rebound.

This price action came in the wake of reports regarding a new U.S. crypto reserve initiative, which included Bitcoin and other major cryptocurrencies.

Bitcoin reacts to Crypto Reserve development

Initially, Bitcoin surged above $94,000 before stabilizing at just over $92,000 at the time of writing. In addition to these price swings, data from CryptoQuant has highlighted notable activity among cryptocurrency exchanges.

According to analyst KriptoBaykusV2, large inflows and outflows of Bitcoin on exchanges have had a direct impact on market sentiment and price trends. 

On the 25th of February, approximately 8.4K BTC moved into exchanges, triggering increased selling pressure and a subsequent price drop. However, the following day saw a reversal, with substantial Bitcoin outflows indicating a shift toward long-term holding strategies.

This pattern of activity stabilized Bitcoin’s price and contributed to a gradual recovery by early March.

Impact of Exchange flows and on-chain metrics

Exchange inflow and outflow data suggest investor sentiment often shifts quickly in response to external factors. The analyst noted that inflows correlate with increased selling pressure, leading to short-term price declines.

Conversely, outflows typically signal a preference for long-term storage. This reduces immediate selling pressure and potentially paves the way for upward price momentum. 

Historical data supports this relationship: rising outflows often coincide with price increases as the circulating supply tightens. KriptoBaykusV2 noted:

“As of March 2, Bitcoin’s price has started to rise again. Historically, when outflows from exchanges increase, prices tend to move upward. 

This is because when investors withdraw Bitcoin from exchanges, the circulating supply decreases, and selling pressure diminishes. This paves the way for a potential price increase.”

Beyond exchange movements, on-chain metrics offer additional context. Data from Glassnode indicates a surge in the number of new Bitcoin addresses in February, reaching a monthly peak of 371,442 on the 26th of February.

While this metric retreated slightly in early March to around 300,000, the overall increase in new addresses suggests growing retail interest in BTC.

This uptick in address activity, combined with the observed exchange flows, provides a more comprehensive picture of what is going on in the market.