Bitcoin Supply in Exchange Wallets Reaches 2.5 Year Low

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In Brief
  • The amount of bitcoin (BTC) stored in exchange wallets has dropped to a 2.5 year low.

  • This was primarily prompted by increased institutional buying and offline storage.

  • There appears to be a shift in focus towards decentralized exchanges (DEX).

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Blockchain analytics firm Glassnode has revealed that the bitcoin supply in exchange wallets is now at its lowest level for the first time in 2.5 years.

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Nearly 18,500 bitcoins (BTC) worth $625 million have moved off exchanges over the last week. The bitcoin price had surged over 3,5% at press time and now sits at almost $37,000.

Combined with a large liquidity crunch currently seen on crypto exchanges, increasing demand, and the awaited resolution of lengthy consolidation, it may be time for another bitcoin rally soon.

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Institutional Participation Growing

According to the analysis, the amount of BTC stored on exchanges started declining drastically as recently as April 2020. This occurred at the height of the Covid-19 pandemic and global economic recession.

In its efforts to shore up the U.S. financial system, the Federal Reserve (Fed) decided to significantly cut interest rates and keep the printing press rolling. This encouraged individual investors and institutions to use bitcoin as a means of hedging possible inflation risks. Consequently, large holders are likely storing their bitcoins offline.

As reported by Bitcointreasuries.org, over 1.2 million btc belong to private and publicly-traded companies, with Grayscale holding more than 600,000 btc ($26,4 billion) or over 4.1% of all bitcoins in circulation.

The institutional wave continues as business intelligence provider MicroStrategy substantially grew its bitcoin stash by purchasing an additional 295 coins for $10 million in cash. 

On-chain data provider Santiment indicates that bitcoin whales surpassed mid-tier addresses in terms of percentage holdings for the first time in history.

Shifting Focus to DEXs? 

Another potential reason for this massive bitcoin supply drop may be the shift in focus to non-custodial decentralized exchanges (DEX), such as Uniswap and Sushiswap. Though bitcoin doesn’t trade on these exchanges, there is an ethereum representation of it.

DEXs continue to receive a lot of attention. These two leading exchanges handled 48.8% and 23.3% of all decentralized trading volumes, as Dune Analytics data reveals.

Are bitcoin hodlers moving over to the Ethereum (ETH) ecosystem? It’s unclear yet. However, ETH has smashed through the $1,500 level to a new all-time high. It’s not unreasonable to conclude this may be the case.

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Amy was born in Malmo, Sweden. She became interested in cryptocurrency due to her husband, who was an early investor in bitcoin. Now, Amy writes for a number of crypto outlets, invests in cryptocurrencies, and spends time with her cat Buterin.

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