In recent years, there has been a significant decline in the volume of Bitcoin stored in exchange wallets, signaling a notable shift in investor behavior. This change is particularly evident since mid-March 2020, when over 17% of Bitcoin’s total supply was housed on exchanges, marking a record high. Despite Bitcoin’s 2021 bull run, which saw its price surge to $69,000 in November of that year, the trend of declining exchange balances has continued.
Data analysis conducted by CryptoSlate using Glassnode data has revealed a persistent decrease in Bitcoin holdings on exchanges in 2024. From January 1 to February 19, the amount of Bitcoin in exchange wallets dropped from 2.356 million BTC to 2.314 million, the lowest since April 2018. Consequently, the percentage of Bitcoin’s supply in exchange wallets also decreased from 12.03% to 11.79%.
The diminishing presence of Bitcoin on exchanges signifies a growing preference among holders to transfer their assets away from these platforms. This movement suggests a broader strategy shift towards long-term holding or a reaction to prevailing market conditions. Individual exchanges have shown nuanced trends within this broader pattern.
For instance, Coinbase experienced a significant reduction in its Bitcoin balance, shedding over 20,000 BTC from January 1 to February 19, with consistent net outflows observed since the end of January. Similarly, Binance saw a notable reduction in its Bitcoin balance, with net outflows starting on February 8 after an initial increase until January 26. Other exchanges such as Kraken and OKX also aligned with this trend, recording net outflows and a substantial decrease in their Bitcoin balances.
Contrary to the general trend, Bitfinex and Bittrex have seen net inflows since mid-January. Bitfinex witnessed over 16,000 BTC added to its Bitcoin balance since the beginning of the year, aided by consistent net inflows since January 15. Bittrex also experienced a spike in its balance, with a modest increase of 3,000 BTC since January 1, accompanied by consistent net inflows since January 14.
The general decrease in Bitcoin balances on exchanges is correlated with a bullish sentiment in the market. Investors withdrawing Bitcoin to personal wallets for long-term holding helps reduce the selling pressure on exchanges. Despite a temporary dip in mid-January, Bitcoin’s price surged from $44,152 on January 1 to $52,000 by February 19, indicating strong market confidence.
The launch of Spot Bitcoin ETFs in the US has likely influenced these trends, along with other significant factors such as growing optimism among investors regarding further price gains driven by broader acceptance and investment in Bitcoin. Security and regulatory compliance concerns arising from incidents like the collapse of FTX and Celsius, as well as legal challenges faced by Binance, have prompted users to withdraw funds from exchanges. These events have heightened awareness of the risks associated with keeping assets on exchanges, leading to a shift towards personal wallets for enhanced control and safety.
As Bitcoin is increasingly being removed from exchanges, there may be a reduction in liquidity that could potentially increase price volatility. However, this movement also reflects a firm conviction in holding among investors, setting the stage for potentially more sustained price growth as the available supply becomes more constrained. This shift towards long-term holding and the decrease in exchange balances demonstrate a changing landscape in investor behavior and a growing preference for personal wallet custody.