Definition ∞ Exchange Reserve refers to the total quantity of a specific cryptocurrency or digital asset held by a centralized exchange on behalf of its users. This metric indicates the liquidity available on the platform for trading that asset. A high reserve suggests ample supply for transactions, while a declining reserve can imply withdrawals or increased demand. It provides insight into an exchange’s capacity to facilitate trading activity.
Context ∞ Monitoring Exchange Reserve data is a key practice for crypto market analysts and news outlets, as significant changes can signal shifts in market sentiment or potential price volatility. A rapid decrease in reserves might indicate users moving assets off the exchange for long-term holding or decentralized finance participation, suggesting bullish sentiment. Conversely, an increase could signal an intent to sell, potentially leading to price pressure.
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