- On-chain data shows that the Bitcoin exchange supply has dropped to its 2017 level.
- Centralized crypto exchanges hold less than 12.5% of Bitcoin’s circulating supply.
- The drop in Bitcoin exchange supply began in 2020, after the third Bitcoin halving.
Data from Roots, the Bitcoin on-chain and cycle analyst, shows that the Bitcoin exchange supply has dropped to its 2017 level. According to Roots, centralized crypto exchanges (CEX) hold less than 12.5% of Bitcoin’s circulating supply, and chances are institutions with over $10 trillion in assets under management (AUM) may be coming after that.
WTF happened to exchanges? #Bitcoin https://t.co/AGQpbBGXwm pic.twitter.com/SkRFmQOa5Y— Root (@therationalroot) June 27, 2023
Additional data from Roots showed the drop in Bitcoin exchange supply began in 2020, after the third Bitcoin halving. That period coincides with the launch of multiple Bitcoin ETFs and several institutional investors in the crypto industry. Such a development suggests that institutional holders, via ETFs, may be responsible for the large number of Bitcoins held outside crypto exchanges.
Most AUMs are long-term investments. They are under self-custody and away from exchanges. Most digital asset holders keep them away from centralized exchanges. Such acts are mainly for security reasons and to ensure it does not expose the assets to impulse or speculative trading.
Bitcoin holders use the exchange supply metric to gauge the mood and sentiment of the overall market. They use it to ascertain whether traders are preparing to trade their Bitcoins or keep holding onto them.
An increase in Bitcoin exchange supply suggests holders may be bringing them forward to an environment where they can exchange them for other digital assets of fiat. On the reverse, a drop in the Bitcoin exchange supply suggests holders are taking them away from tradable environments. That would imply keeping them away for long-term storage.
With the declining volume in the Bitcoin exchange supply, most traders believe a bull run is imminent. They also think that the flagship crypto’s adoption level is on the increase, and the impact of these would be a substantial increase in cryptocurrency’s value.
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