The amount of bitcoin (BTC) held on exchanges has steadily declined since the bear market began in 2022, but the rate at which investors moved their cryptocurrencies off exchanges has accelerated in recent months. This has resulted in one of the sharpest declines in the percentage of BTC supply lagging on centralized exchanges.
Bitcoin
In a new report from on-chain data aggregator Sanitation, Bitcoin on exchanges has witnessed one of the sharpest declines in history. In January 2022, BTC on exchanges accounted for about 11.85% of the total supply, but now, a year later, it has dropped to only 6.65% of the supply left on exchanges.
This is due to the growing distrust of centralized exchanges following the collapse of FTX, one of the largest crypto exchanges at the time. Self-custody gained prominence when the exchange went bankrupt, causing more supply than usual to flow out of the exchange.
Over time, some exchanges have been hit harder than others when it comes to withdrawals. Much of this hinges on the amount of distrust circulating around various exchanges, with some, such as Kraken, seeing 59% of the exchange’s total BTC drained away in a one-year span.
Coinbase and Bitfinex emerged as some of the hardest hit exchanges with outflows of 33% and 32% respectively. Coinbase’s outflow came amid rumors of insolvency which have since been debunked by the stock market.
Other exchanges include KuCoin which is seeing 32% of BTC holdings drained, as well as Binance which is currently holding 25% less BTC than a year ago. Bitstamp was the lowest of the major exchanges, with about 23% less BTC than at the beginning of 2022.
BTC on centalized exchanges falls to 6.65% of supply | Source: Santiment
Will this drive up the BTC price?
With so much bitcoin leaving centralized exchanges, this points to one phenomenon and that is the fact that investors are hoarding their coins. Additionally, with more investors choosing to self-custody their BTC, much less supply remains active on exchanges ready to be sold.
This has succeeded in easing the selling pressure on the digital asset in recent months. It is also evident in the strength of the current rally as BTC has been able to hold its position just above $21,000. The less bitcoin on centralized exchanges, the lower the available supply to sell, which can overtake demand and even overtake supply.
BTC rally slows down | Source: BTCUSD on TradingView.com
As demand rises due to less available BTC on centralized exchanges, the price of BTC will continue to rise along with it. This would allow the digital asset to test the $22,000 resistance level before the week is out.
BTC is currently trading at $21,231. The price of the cryptocurrency is up more than 21% in the past week, successfully pushing its market cap above $400 billion once again.
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