Analysis: Bitcoin's recovery faces a test as exchange reserves rebound and spot demand turns negative again.

October 19 - CryptoQuant certified analyst XWIN Japan stated in a post that the latest on-chain data indicates Bitcoin still shows signs of bottoming out, but the recovery process is uneven, with exchange reserves rebounding, spot demand turning negative again, and divergent holding behaviors among whales of different sizes.

1. Exchange reserves rebound: In early October, Bitcoin exchange reserves were approximately 2.67 million BTC, and have now risen to about 2.68 million BTC. Although still below January levels, rising reserves do not necessarily mean increased selling and may also be related to changes in custody methods.

2. Spot demand recovery hindered: The 30-day spot demand indicator briefly approached zero before turning negative again. Perpetual contract demand remains positive, providing support for total demand. This indicator differs from the apparent demand indicator discussed earlier, and the two values are not directly comparable.

3. Divergent holdings among whales of different sizes: The group holding 100 to 1,000 BTC has remained net accumulators over the past 60 days, but the pace of accumulation is below the late September peak; the net position decline for the group holding 1,000 to 10,000 BTC has narrowed to near zero, while the group holding more than 10,000 BTC remains in net distribution, indicating that accumulation has not yet spread widely. The above rolling data includes activity prior to October and may also be affected by address transfers between groups of different holding sizes.

XWIN Japan believes that low exchange reserves and continued accumulation by some whales may still provide support for Bitcoin bottoming out. However, to achieve a sustainable recovery, sustained positive spot demand is needed, buying interest must absorb BTC flowing back into exchanges, and accumulation behavior must expand to more holding groups. Additionally, market expectations driven by the U.S. midterm elections and monetary policy need to translate into actual buying.