According to a new analysis by Crypto rank, 6.3 percent of the entire Bitcoin supply is held in exchange wallets.
Bitcoin (BTC) supply is drying up to levels not seen in years, which is good news for an orange Christmas. According to a recent tweet by CryptoRank, cryptocurrency exchanges own only 6.3 percent of the total Bitcoin supply, or 1.3 million BTC.
The declining supply is nothing new; it has been moving down since the Bitcoin block reward was halved in 2020. The availability of BTC on exchanges followed suit, gradually declining over the last year. In October 2020, just before the all-time highs of the 2020 Christmas season, exchange wallets accounted for 9.5 percent of the BTC supply, and 7.3 percent in July this year. The December result of 6.3 percent is the lowest since 2021.
Coinbase’s dominance in the BTC wallet space is also eroding. The American exchange used to own more bitcoins than the rest of the world combined. Over the last year, its dominance has dropped from 50.52 percent to 40.65 percent.
The announcement comes on the heels of a slew of bullish price indicators that coincide with Bitcoin’s higher price movement. To begin with, the illiquid BTC supply has iced over for the winter, with a monthly supply of 100,000 BTC changing from a “liquid” to a “illiquid” state. In other words, more BTC is locked away in cold storage than gets mined.
The on-chain analytics company Glassnode offered more encouraging news about exchange behaviour. The seven-day moving average for BTC’s exchange inflow volume just hit a five-month low of 978.452 BTC and has been drifting downward week over week. The exchange supply shortfall could worsen if fewer BTC are transmitted to exchanges.
It’s also worth noting that many retail investors and businesses store their BTC on exchanges, implying that the ‘illiquid’ BTC is considerably lower. Rather than putting their BTC into cold storage, some BTC hodlers would entrust the safekeeping of their keys to exchanges.
Despite the best efforts of Bitcoiners like Andreas Antonopolous to ensure that ‘not your keys, not your Bitcoin’ is part of everyday BTC motto, Binance CEO and co-founder Changpeng Zhao has pushed the hot wallet practise.
As a result, while 1.3 million BTC are held on exchanges, they may not be circulating and instead contribute to the illiquid supply.
Despite calls for a “Santa Rally” based on bullish analytics, the bears aren’t out of the woods just yet.
BullRun Invest’s tweet, based on Glassnode statistics, shows that 24.6 percent of all BTC supply is trading above $47,000.
It means that nearly a fourth of the BTC purchased at those prices is now worthless. There may be fewer presents beneath the tree tomorrow if BTC fails to break into the 50s.
