Bitcoin supply on exchanges hits 31-month low as whales HODL

Bitcoin supply on exchanges hits 31-month low as whales HODL
9 months ago
3 mins read

Bitcoin (BTC) has continued to register immense volatility in the last few weeks, with the price dropping below the $50,000 mark, a factor that seems to be affecting the asset’s supply on exchanges. 

As of December 13th, 2021, Bitcoin’s supply on exchanges had hit a 31-month low at 11.96% of the asset’s total supply, on-chain data provided by Santiment indicates

Bitcoin supply on exchanges. Source: Santiment

According to Santiment, the decline in the supply should be considered a positive outlook as it points to limited chances of any significant sell-offs. Notably, the Bitcoin supply on exchanges is a vital indicator of the overall BTC network activity as it can signal the asset’s direction in the short to medium term.

“Prices have been volatile as of late, but the lack of BTC moving to exchanges right now is a positive sign that significant selloff risk should be limited,” Santiment said.

Drivers for Bitcoin drop in exchange supply

The presumed logic behind the dip is that more Bitcoin has moved off exchanges, potentially to cold storage wallets, as investors become more bullish about the long-term value of the number one ranked cryptocurrency, with recent on-chain transaction value dropping to a 3-month low also supporting this notion. This aspect fuels less selling pressure as investors bet that the bearishness might be gradually reverting to a more supportive outlook.

In general, the drop to below $50,000 indicates a lot of accumulation at this level, mainly by whales who prefer to ‘HODL‘ in anticipation of a price rally. The HODLing behavior offers a cushion to investors since they are not susceptible to near-term price changes. 

With investors potentially reverting to HODLing, the move also aligns with the growing status of the asset as a store of value. 

By press time, Bitcoin was trading at $48,700, having made gains of below 1% in the last 24 hours. 

Bitcoin seven-day chart. Source: CoinMarketCap

Additionally, the drop in the Bitcoin supply can also indicate that investors and traders may have changed their preferred platforms for trading. For instance, retail investment apps offering crypto trading are emerging as a strong alternative to exchanges as they provide investors with flexibility. 

Worth noting is that the alternative crypto trading platforms align with the ongoing regulatory crackdown on various exchanges. With the uncertainty, investors prefer to withdraw their holdings from exchanges to avoid being in a situation that bars them from accessing their funds. 

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Justinas Baltrusaitis

Justin crafts insightful data-driven stories on finance, banking, and digital assets. His reports were cited by many influential outlets globally like Forbes, Financial Times, CNBC, Bloomberg, Business Insider, Nasdaq.com, Investing.com, Reuters, among others.