Reserves are the accumulated result of exchange-netflow, and they answer a different question: how much is immediately available to be sold on venues rather than how much moved today.
The caveats are important. A decline can reflect self-custody, or it can reflect a venue losing customers, migrating to new wallet infrastructure, or moving assets to a third-party custodian where analysts no longer see them. After 2022 the same figure also became a solvency signal, which complicates the supply reading.
Also remember that selling no longer requires coins on a venue. Perpetual and options markets let anyone express a short with only margin, so a shrinking spot reserve is a weaker bearish-supply argument than it was in earlier cycles.
Related: exchange-netflow, proof-of-reserves, self-custody, exchange-insolvency-risk