The Bitcoin Balance on Exchanges is showing the number of Bitcoins that are being held on exchanges. Whaleportal is tracking the most relevant exchange's wallets to determine the balance on most exchanges. This metric can be very helpful in showing the underlying behavior of investors and traders.
When traders are sending Bitcoins to exchanges, it will be visible on the Bitcoin Exchange Balance chart, you will see an increase. When traders are withdrawing their Bitcoins from exchanges the Bitcoin Exchange Balance will decrease. In this way, you can view whether traders are sending or withdrawing their Bitcoins from exchanges.
The Bitcoin balance on exchanges can help us determine the amount of potential selling or buying pressure for Bitcoin. If the Bitcoin balance on exchanges is rising, it means that investors and traders are sending their Bitcoins to exchanges which could mean they have the intention to sell their Bitcoin and thus create selling pressure. We often see that before Bitcoin starts to sell oﬀ, Bitcoins are sent to exchanges. It works the other way around as well, when Bitcoins are leaving the exchanges it means that investors and traders are accumulating. Therefore the bitcoin moving away from exchanges is unlikely to be sold.
This doesn't mean that it's always the case that when Bitcoins on exchanges increase, the price drops. But there is a clear correlation, therefor this metric can be very powerful to spot the amount of confidence in the markets.
The Bitcoin balance on exchanges can help a trader spot panic or confidence. Generally, when traders are withdrawing their Bitcoins it means that they are less likely to sell in the short term. When traders are sending Bitcoins to exchanges, it could mean that more traders are intending to sell in the short term and therefore see a decrease in the price of Bitcoin.