This represents an annual reduction of 11% in the amount of Bitcoin on exchanges. This is about 60% of the total supply of Bitcoin issued in more than 12 months.
Last May 25th, the total amount of Bitcoin that cryptocurrency exchange wallets hold decreased to its lowest point in 18 months, to just 2.3 million, according to data estimates from Glassnode. The decrease establishes an annual reduction of 11% in the number of bitcoins held on exchanges.
In the same period, the amount of Ether on exchange wallets increased by more than 7%. Some market participants see this as a sign that Bitcoin investors are increasingly taking direct possession of their cryptocurrencies.
Avi Felman, Head of trading for Stamford-based BlockTower Capital, said that people are aggressively accumulating, and market participants seem to have more time preferences these days. He stressed that he thought that the trend was going to continue.
A proportion of these active Bitcoin accumulators, usually motivated by their ideology, are the so-called “holders of last resort.” This is a label that implies that they never have the intention of selling, regardless of market movements.
Kraken Bitcoin strategist Pierre Rochard said that these types of investors partially contribute to the decline in the balance of Bitcoin on exchanges, by continuing the accumulation in the long term and safeguarding their bitcoins. Kraken is the largest cryptocurrency exchange established in the USA that is based on its liquidity, according to data from Crypto Watch.
Rochard added that the improvement in fiduciary rails also contributes materially to this trend. This allows arbitrage traders to be more capital efficient, thus keeping less Bitcoin.
It is important to note that the analyses of data from the blockchain, of the balances of exchanges, are only an estimate. Some exchange addresses could be overlooked or unknown to data aggregators. However, the bearish trend is pronounced. According to Rochard, the data on the blockchain are not perfect and the new wallets of the exchanges could be lost.
Brokers as Possible Reason for Decline
Some others see that the abandonment of bitcoins from exchanges is for a reason completely unrelated to inveterate and strong-willed investors. According to them, it is rather due to the promotion and prioritization of brokers.
Felman added that there are currently few alternatives for holders to keep bitcoins on an exchange if they want to trade them. However, new offers in the main brokerage space will lead to higher exits from specific exchange wallets.
For example, the trading and lending company Genesis acquired Vo1t, as part of its strategy to become a full-service prime brokerage, last May 21st. Tagomi, a leading digital asset brokerage acquired by Coinbase, is the best of the San Francisco-based exchange to expand its institutional trading service.
Regardless of the reason, a steady decline in the supply of Bitcoin on exchanges implies a strong level of confidence among holders. That is the opinion of Yan Liberman, former associate at Deutsche Bank and co-founder of the digital asset research group Delphi Digital.
Liberman added that about 60% of the supply of issued bitcoins has not moved in more than 12 months. These types of events have been precursors to previous bullish cycles.
By Willmen Blanco