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Bitcoin is moving sideways in its current range, the cryptocurrency managed to avoid another attack from the bears, but uncertainty in the market remains high. This status quo supports the price action and could be the dominant trend for the rest of the year.
At the time of writing, Bitcoin is trading at $16,400. The cryptocurrency is stuck at these levels for today’s trading session after retesting its yearly lows yesterday. In the wake of FTX’s collapse, crypto users have lost confidence. This could have a long-lasting impact on the emerging asset class.
Bitcoin holders flee exchanges
Data from crypto exchange Bitfinex indicates that users are massively withdrawing their Bitcoin from exchanges. The collapse of the FTX caused a massive BTC outflow from trading platforms; investors are afraid of losing their money due to the contagion.
The chart below shows that the exchanges’ BTC supply has declined since mid-2021. This trend continued into 2022 when the crypto market crashed and Bitcoin lost more than 80% of its value from its all-time high of $69,000.
Less Bitcoin on trading platforms is a good thing in another market. Market participants saw this as a bullish sign as people and institutions are unable to sell their BTC. Thus, a bullish price momentum has fewer chances to meet resistance.
However, the current market conditions are different. The decrease in Bitcoin supply on exchanges may indicate problems for the crypto market.
As Bitfinex noted, crypto exchange Gemini has seen the biggest drop in its BTC supply. The exchange saw its Bitcoin reserves fall from 210,000 BTC to 163,000 in one week. In total, trading platforms lost more than 1 million BTC in the past month. The report claims:
This data suggests that a mass retail exodus from centralized exchanges is underway. Any development that suggests a particular stock exchange is in trouble is a catalyst for stock exchange depletion. This trend has been present since the rumors of FTX insolvency first surfaced.
Throw in the towel
In addition to the decline in BTC supply, the report also noted discouragement among retail investors. These users may leave the crypto space for good after a blow to FTX.
The report found no spike in self-custodial wallet balances, as measured by monitor Whalemap. The report noted:
Whale bubbles (1-10k BTC balance) serve as local support and resistance, but BTC whales have been sold and their current portfolio balances are not compensating for the stock market outflow (…). The bottom line for investors is that while one might think the numerous Black Swan events are behind us, selling pressure from HODLers and whales is still mounting.