- Bitcoin exchange balance was generally on an upward trend in 2018 and 2019, but there was a change in the market with the COVID crash in March 2020 and the indicator entered a downward trend.
- Events like the 3AC Crash and the FTX Crash caused a particularly sharp drop in the exchange balance.
- With the recent drop, the Bitcoin exchange balance decreased to 2.26 million BTC, reaching the lowest level since March 2018.
Despite the recent rally in Bitcoin, the balance of BTC on exchanges continues to decrease, indicating that investors are not willing to sell.
Bitcoin Exchange Supply Continues to Decline
According to the data from on-chain analytics company Glassnode, withdrawals from exchanges are ongoing. The relevant indicator here is the “exchange balance,” which measures the total amount of Bitcoin in the wallets of centralized exchanges.
When the value of this metric increases, it means that investors are currently depositing coins into these platforms. One reason for BTC holders to transfer their coins to exchanges is for selling purposes, and such a trend can have negative effects on the price in the short term.
On the other hand, a decrease in the indicator means that supply is leaving exchanges. If this trend continues for a long time, it may indicate that investors are currently accumulating. This situation can have a positive impact on the price of the cryptocurrency.
Here is a chart showing the trend of Bitcoin exchange balance in the past few years:
As seen in the above chart, the Bitcoin exchange balance was generally on an upward trend in 2018 and 2019, but there was a change in the market with the COVID crash in March 2020 and the indicator entered a downward trend.
This trend was interrupted during the 2021 bull run, and the metric mostly moved horizontally, with some increases occurring near the peaks of rallies. This deviation from the trend may be a result of investors taking advantage of the opportunity to deposit coins for profit-taking.
However, with the end of the bull market and the transition to a bear period, the indicator returned to a downward trend. Events like the 3AC Crash and the FTX Crash caused a particularly sharp drop in the exchange balance, as the collapse of these platforms made investors more cautious about holding coins in centralized storage.
However, with the start of the Bitcoin rally this year, the metric started to move horizontally again with a return in demand. Until the local peak in April, while exchanges were receiving net deposits, supply also clearly increased.
Interestingly, despite the desire of investors to sell during that period of price increase, it was observed that the exchange balance decreased further with the recent price increase above $30,000. This trend of net withdrawals may indicate a lack of willingness to sell in the market currently, at least compared to the demand for transferring coins to their own storage places.
With the recent drop, the Bitcoin exchange balance decreased to 2.26 million BTC, reaching the lowest level since March 2018.
