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Another significant milestone is about to be reached by Shiba Inu, but for the wrong reason this time. The dollar value of SHIB held on centralized exchanges is quickly approaching $400 million, and if market conditions don't improve, that threshold may soon be crossed.
Shiba Inu's exchange reserves can decrease
Although declining exchange reserves are frequently seen as a bullish indication, the current decline suggests otherwise. The main difference is that the devaluation of SHIB itself appears to be more responsible for the decline than large token withdrawals. Based on the most recent on-chain metrics, the Exchange Reserve USD is currently valued at approximately $414.8 million.
Even slight price declines could cause the total market value of exchange-held tokens to fall below $400 million because SHIB is still trading far below its annual highs. In other words, rather than because exchanges are holding noticeably fewer coins, the reserve measured in dollars is declining because each SHIB token is worth less.
Buyers were unable to maintain the price above key resistance after it surged on unusually high trading volume, causing it to fall back below that level. SHIB is presently trading at $0.0000048, close to the 20-day and 50-day EMAs, with the 100-day EMA at $0.0000050 continuing to be the immediate barrier.
Relief, not a SHIB bull run
The most recent rally appears to be more of a relief bounce than the start of a long-term trend reversal until that level is convincingly reclaimed. The main long-term resistance remains the 200-day EMA, which is currently located close to $0.0000060. Another significant surge in buying interest would be necessary to reach that level, but it has not happened yet after the recent volume spike subsided.
Momentum indicators also advise caution. During the breakout, the RSI shot into overbought territory, but as buying pressure wanes, it has already started to cool. Momentum is still stronger than it was earlier in the month, but it no longer reflects the explosive strength of the first rally. In the meantime, overall on-chain activity has not changed much.
Network usage has not substantially declined, as evidenced by the slight increases in active addresses, receiving addresses, and transaction counts.
This supports the idea that price depreciation rather than a decline in investor participation is the primary cause of the diminishing dollar-denominated exchange reserve. The $400 million exchange reserve threshold may be breached within the next few days if SHIB continues to decline from its current levels, because the assets on exchanges are worth less in dollars.
On the other hand, a recovery above the 100-day EMA would instantly increase the reserve's USD value without necessitating a significant shift in the quantity of tokens held on exchanges. Although SHIB's exchange reserve is still under pressure, the metric reveals insights into both investor behavior and the token's valuation.
Dan Burgin
U.Today Editorial Team
