On-chain data shows the supply of Bitcoin on exchanges has decreased recently as holders have pushed for custody.
Bitcoin supply at the lowest value exchange since November 2018
According to data from an on-chain analytics company Holy, only $29.2 billion of BTC are left on exchanges today. There are two indicators of relevance here: “in-exchange supply” and “off-exchange supply.”
As the name already mentioned, they measure the total amount of Bitcoins that are currently in the wallet of the centralized exchange and the supply that is kept in their own custodian wallet.
In general, one of the main reasons investors buy into an exchange is for selling purposes, so the supply on the exchange can reflect the available selling supply of Bitcoin.
Thus, when the value of this metric increases, there is a possibility that the selling pressure in the market also increases, and BTC observes a bearish impulse. Also, if it decreases instead (meaning the supply outside the exchange increases), the price of BTC can see a long-term bullish effect.
Previously, investors usually believed that a supply shock could affect the market if the supply on the exchange was reduced enough. But today, the market environment is more diverse, so exchanges play a smaller role.
However, the supply can still be important for the market. Here is a chart showing the trend of Bitcoin supply on exchanges, as well as supply outside of the platform, over the past year:
Looks like the value of the metric has declined in recent days | Source: Santiment on Twitter
As shown in the chart above, the supply of Bitcoin on the exchange has decreased over time, indicating that investors are constantly withdrawing coins from the platform.
The most significant decline in the past year came after the collapse of the cryptocurrency exchange FTX, which forced investors to reconsider their trust in centralized platforms, leading to many people withdrawing massive amounts for self-custodial wallets. Only the user holds the private key for the wallet.
The pullback of the indicator continued recently when the price of the cryptocurrency has consolidated on the side around $23,000. This may indicate that some recent accumulation has occurred at this level.
With the latest continuation of the decline, the supply of BTC on the exchange, as measured by Santiment, has dropped to just 1.27 million BTC. The supply outside the exchange has grown naturally during this event and has reached a high of 18.12 million BTC.
This means that the supply of Bitcoin outside the exchange is 14.26 times the supply on the platform. This dynamic can have a positive impact on cryptocurrency prices in the coming months.
The price of BTC
At the time of writing, Bitcoin is trading around $23,000, down 1% over the past week.
BTC continues to move sideways | Source: BTCUSD on TradingView
Featured images from Kanchanara on Unsplash.com, charts from TradingView.com, Santiment.net