The amount of Bitcoin on exchanges has reached its lowest level since December 2017, which suggests an increased interest in self-custody among traders. A lower supply of the flagship cryptocurrency on trading platforms reduces the potential risk of the coins being sold back on the market, ultimately reducing the available supply and making it easier for Bitcoin’s price to rise if demand grows.
Cryptocurrency, and Bitcoin in particular, have long been associated with the concept of decentralization and autonomy. Self-custody, which refers to the practice of securely storing one’s own cryptocurrency without relying on third-party services like exchanges, is a key element of this principle.
According to Coinglass, the balance of Bitcoin on all exchanges was 1.13 million BTC as of May 9, 2023, down by nearly 15% since May 7, 2023. This represents about 6% of the total supply of Bitcoin, which is currently around 18.8 million BTC. The last time the ratio was this low was in December 2017 when Bitcoin reached a high of nearly $20,000 per coin.
Data from crypto analytics platform Santiment shows that only 5.84% of the supply is being held on cryptocurrency exchanges. However, it’s worth noting that data may differ between platforms due to potential changes in how exchange wallets are identified.
The decline in Bitcoin supply on exchanges suggests that more users are holding their coins for the long term, rather than selling them back to exchange wallets. This could be a sign of increased confidence and interest in Bitcoin as a store of value and a hedge against inflation, especially given the ongoing economic uncertainty and monetary stimulus.
Some users may be choosing to self-custody their funds after witnessing the collapse of FTX and other centralized platforms. Many do not trust these platforms to hold their funds for them, especially if they are not actively using them to trade.
As CryptoGlobe has reported, former Goldman Sachs executive Raoul Pal recently offered an optimistic outlook on the trajectory of the cryptocurrency markets. He anticipates that the crypto sector will rally out of its current bearish state faster than it did in 2019 and expects significant growth within the next half year.
However, a Goldman Sachs survey has shown a marked decline in enthusiasm for cryptocurrencies among wealthy family office investors, which can be attributed to the tumultuous volatility experienced in the crypto market over the past year.
The current trend of Bitcoin supply on exchanges reaching its lowest level in over five years could have several implications for the market. For one, it may suggest that more users are storing their cryptocurrencies off-exchange, which could help mitigate some of the risks associated with trading on centralized platforms.
In addition, the reduced supply on exchanges could bolster the price of Bitcoin if demand continues to grow. With fewer coins available for trading, demand may outstrip supply and cause the price to rise. This could be especially true if more users view Bitcoin as a store of value and hedge against inflation, as some analysts have suggested.
Finally, the trend toward self-custody could be a sign that the cryptocurrency industry is maturing. As more users take control of their own funds, it may result in a more decentralized market that is less susceptible to the risks associated with third-party custodians.
While it remains to be seen what the long-term effects of this trend will be, the current data suggests that Bitcoin holders are becoming more confident in the digital asset and are choosing to hold onto it for the long term, despite fluctuations in its price. This sentiment could play a crucial role in shaping the future of the cryptocurrency market and underscores the growing importance of self-custody in maintaining the principles of decentralization and autonomy.