Bitcoin Exchange Supply Drops, Holders Push To Self-Storage
On-chain data shows that Bitcoin supply on exchanges has decreased recently as holders have pushed towards self-storage.
Bitcoin supply on exchanges is at its lowest value since November 2018
According to data from the analysis company at the chain Sentiment, only $29.2 billion worth of BTC is left on exchanges now. There are two indicators that are relevant here: “supply on exchanges” and “supply off exchanges.”
As their names already suggest, they measure the total amount of Bitcoin currently sitting in centralized exchange wallets and the supply held in self-custodial wallets respectively.
In general, one of the main reasons why investors deposit into exchanges is for selling purposes, so that the supply on exchanges can reflect Bitcoin’s available selling supply.
Therefore, whenever the value of this metric increases, there is a chance that selling pressure in the market also increases and BTC observes a bearish impulse. Similarly, if it decreases instead (meaning off-exchange supply increases), BTC’s price could see a long-term bullish effect.
In the past, investors used to believe that a supply shock could brew in the market if supply on the stock exchanges decreased sufficiently. But these days the market environment is more diverse, so exchanges play a smaller role.
Nevertheless, their supply may still have some importance for the market. Here is a chart showing the trend in Bitcoin supply on exchanges, as well as supply outside of these platforms, over the past year:
Looks like the value of the metric has declined in recent days | Source: Santiment on Twitter
As shown in the graph above, Bitcoin supply on exchanges has been declining for some time, suggesting that investors have been steadily withdrawing a net amount of coins from these platforms.
The most significant decline over the past year came after the collapse of cryptocurrency exchange FTX, which forced investors to reassess their trust in centralized platforms, leading many of them to withdraw huge amounts to self-custodial wallets. Only users have the private keys to these wallets.
The pullback of the indicator has continued recently while the price of the cryptocurrency has consolidated sideways around the $23,000 mark. This may mean that some new accumulation has taken place at this level.
With the latest continuation of the decline, BTC supply on exchanges, as measured by Santiment, has fallen to just 1.27 million BTC. The off-exchange supply has naturally grown while this has been happening and has reached a new all-time high of 18.12 million BTC.
This means that the Bitcoin supply outside of exchanges is 14.26 times the supply within these platforms. This dynamic could have a positive effect on the cryptocurrency’s price in the coming months.
BTC price
At the time of writing, Bitcoin is trading around $23,000, down 1% in the past week.
BTC continues to move sideways | Source: BTCUSD on TradingView
Featured image from Kanchanara on Unsplash.com, Charts from TradingView.com, Santiment.net
