Exchanges around the world now hold about 2.39 million bitcoins, worth roughly $139.86 billion at the current market price. This represents a 25% decline in Bitcoin exchange balances since their peak in 2020. It is also the lowest level of BTC holdings on exchanges since April 2018.
More than ten years after the first application, spot Bitcoin exchange-traded funds (ETFs) debuted in the US in January 2024. Since then, Bitcoin withdrawals have significantly increased. Roughly $10 billion worth of BTC had been withdrawn as of Q1 2024, signalling a potential supply squeeze for Bitcoin users.
Bitcoin balance on exchanges have seen significant changes
CryptoQuant contributor Gaah highlighted in an analyst note, “With Bitcoin reserves on exchanges hitting new lows for the year, this could indicate reduced selling pressure, potentially favoring a bull market if demand also continues to grow.”
In March 2020, BTC balances on exchanges peaked at nearly 3.2 million. By September 2024, this number had dropped by 0.8 million.
Over $40 million has been withdrawn from Bittrex accounts since May 2023, and a notable $150 million from Binance. With less than 3 million coins in active circulation, the withdrawal trend hints at a possible supply crunch in the next 6 to 12 months.
Investors find crypto exchanges less appealing
Following the FTX collapse, investors have grown considerably wary of crypto exchanges. The stacked balance metric from Glassnode confirms that a significant portion of the decline came from FTX, with multiple crypto users embracing contagion fears across the Bitcoin market.
Besides, with the persistent market volatility, investors opt to play it safe and take up spot ETFs to gain exposure to the current bitcoin price without buying the asset. The prevailing hacks and scams among crypto exchanges only intensify apprehensions among investors who will likely hold onto their Bitcoin and consider other exchange alternatives.
Still, the actual profitability of cryptocurrency exchanges will be determined by whether investors opt to leave their BTC on these platforms or transfer it to private wallets, a factor that could exacerbate the supply crunch.
More than 123 days have passed since the Bitcoin halving, and BTC’s price is yet to surpass its pre-halving all-time high. Bitcoin is down 13% over the last month and 14% over the last 30 days. This has left market analysts debating whether Bitcoin will launch a rally during the fourth quarter of 2024.
