The amount of bitcoin (BTC) held on exchanges has continued to decline since the bear market began in 2022, but the rate at which investors are withdrawing cryptocurrencies from exchanges has accelerated in recent months. This led to one of the sharpest drops in the percent of BTC supply left on centralized exchanges.
Bitco
In a recent report by an on-chain data aggregator Holy, bitcoin held on the exchange has witnessed one of the sharpest declines in history. In January 2022, the BTC held on the exchange was about 11.85% of the total supply, but now, a year later, it has dropped to only 6.65% of the supply remaining on the exchange.
This is a result of the distrust of centralized exchanges after the collapse of FTX, one of the largest crypto exchanges at the time. Custody is more prominent when an exchange files for bankruptcy, causing more supply than normal to exit the exchange.
Over time, some exchanges have been hit harder than others when it comes to withdrawals. A lot of this depends on the amount of mistrust that exists around the different exchanges, with some like Kraken seeing 59% of the total BTC held on exchanges leave in one year.
Coinbase and Bitfinex emerged as some of the hardest-hit exchanges with outflows of 33% and 32% respectively. Coinbase’s outflows come amid rumors of insolvency that have been denied by the exchange.
Other exchanges including KuCoin saw 32% of their BTC holdings flow out, as well as Binance which now holds 25% less BTC than a year ago. Bitstamp is the cheapest among the big exchanges, holding BTC around 23% lower than it was in early 2022.
BTC on centalized exchanges falls to 6.65% of supply | Source: Santiment
Will This Increase BTC Price?
With so many bitcoins leaving centralized exchanges, this shows one phenomenon and the fact that investors are hoarding their coins. Furthermore, with more investors choosing to hold their own BTC, there is less active supply on exchanges ready to sell.
This has helped ease the selling pressure on digital assets over the past few months. This is also reflected in the strength of the current rally as BTC is able to hold its position above $21,000. The fewer bitcoins in a centralized exchange, the lower the supply for sale, allowing demand to overtake and even overtake supply.
BTC rally slows down | Source: BTCUSD on TradingView.com
When demand increases after BTC is less available on centralized exchanges, the price of BTC will continue to rise along with it. This could see the digital asset test the $22,000 resistance level before the week ends.
BTC is currently trading at $21,231. The price of the cryptocurrency rose by more than 21% in the past week, successfully pushing its market cap above $400 billion again.
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