In recent years, on-chain data has shown a decreasing amount of Bitcoin (BTC) sitting on crypto exchanges, reaching a low not seen in the past six years. According to CryptoQuant’s Bitcoin Exchange Reserve dashboard, balances on exchanges dropped to 1,945,051 BTC as of April 2, 2024. This is a significant decline from the start of the year when exchange reserves were at 2,087,030 BTC, with a decrease of 90,700 BTC ($6.2 billion) in just the past month. The trend of decreasing Bitcoin reserves on exchanges has been ongoing since November 2022, following a bank run on FTX that exposed fraudulent practices and led to an exodus of crypto investors to personal wallets.
Despite the recent outflows, the data from Glassnode suggests that there is still a substantial amount of Bitcoin, around 2.31 million BTC, sitting on exchanges. The specific numbers can vary depending on the addresses identified as belonging to exchanges by each platform. However, the overall trend shows a decline in exchange balances, with the current levels at their lowest point since April 2018. This decline is a bullish sign for market analysts, as it indicates a shrinking liquid supply of BTC on the network, potentially leading to higher prices due to increased demand. The price of Bitcoin has already risen by over 50% since the beginning of the year, reaching $67,499.
The impact of Bitcoin ETFs on the market is also evident in the decreasing supply of Bitcoin on OTC desks in recent months. U.S. Bitcoin spot ETFs, which have absorbed $12 billion in flows since January 11, have become a primary source of OTC demand for Bitcoin. The ETFs now hold over 827,000 BTC, significantly influencing Bitcoin’s global spot market. Some analysts have speculated that the launch of these ETFs could potentially disrupt business at traditional Bitcoin exchanges like Coinbase, as investors favor the ETFs for their ease of access and regulatory compliance.
Looking at the breakdown of Bitcoin holdings by exchange company, Binance currently holds the largest amount at 538,750 BTC, followed by Bitfinex, Coinbase, and Gemini with 372,000 BTC, 292,000 BTC, and 133,000 BTC respectively. This distribution of Bitcoin holdings among exchanges reflects the overall trend of decreasing exchange balances, indicating a shift towards storing Bitcoin in personal wallets or other off-exchange storage methods. The decline in exchange reserves, coupled with the rise in institutional and retail investors buying and holding more Bitcoin in anticipation of ETFs and the halving, suggests a positive outlook for Bitcoin’s price trajectory in the future.
In summary, the decrease in Bitcoin reserves on exchanges, coupled with the rising adoption of Bitcoin ETFs and the shift towards storing Bitcoin in personal wallets, indicates a positive trend for the cryptocurrency market. The decreasing liquid supply of Bitcoin on exchanges suggests a potential increase in demand and higher prices. The dominance of U.S. Bitcoin spot ETFs in the market, along with the decreasing supply of Bitcoin on OTC desks, is reshaping the dynamics of Bitcoin trading and investment. Overall, market analysts view these developments as bullish signals for Bitcoin’s future performance and price trajectory.
