Bitcoin (BTC) exchange reserves are plummeting more and more as analysts pinpoint this trend to a shortage of bitcoin sellers. Since the March crash, the reserves on exchanges rapidly dropped from 2,950,000 BTC to 2,700,000 BTC.
Within seven months, a 250,000 BTC fall in exchange reserves shows a $2.85 billion decline. Behind the steep trend could be two major reasons: a decline in sellers and lower trust toward exchanges.
Is the number of Bitcoin sellers dropping amidst an accumulation phase?
Analysts attribute this drop in Bitcoin exchange reserves to an overall shortage of sellers in the Bitcoin market.
As retail sellers do not sell BTCs at this price, institutions are also acquiring more BTC. The simultaneous drop in selling pressure and an increase in buyer demand is an optimistic trend for BTC.
A pseudonymous trader known as “Oddgems” noted the data shows Bitcoin is likely moving from exchanges to non-custodial wallets. If so, it shows that investors are moving their funds to hold for a longer period. He added:
“More and more #Bitcoin getting out from exchanges and most probably being transferred to non-custodial wallets. This suggests slightly lower liquidity and lower selling pressure going forward.”
Michael van de Poppe, a well-known trader at the Amsterdam Stock Exchange, echoed the stance.
He said that BTC outflows from exchanges are growing as cash reserves from institutions are flowing into Bitcoin. He said:
“To be honest, more and more $BTC going from exchanges towards cold wallet storage. Big listed companies allocating cash reserves to $BTC. Is incredibly bullish.”
The confluence of stagnant retail outflows from Bitcoin and the consistent demand from companies buoy the general sentiment around Bitcoin.
Dan Tapiero, the co-founder of 10T Holdings, said that “shortages of Bitcoin” is possible due to the surging institutional interest.
Other supply metrics indicate higher HODLer activity
According to Glassnode, a large portion of the Bitcoin supply is kept in “accumulation addresses.” These addresses represent those who never moved BTC from their wallets, who are likely storing them for the long term.
When “HODLing” activity is high, which refers to holding onto BTC for prolonged periods, it typically shows the start of an accumulation phase. Glassnode said:
“Bitcoin accumulation has been on a constant upwards trend for months. 2.6M $BTC (14% of supply) are currently held in accumulation addresses. Accumulation addresses are defined as addresses that have at least 2 incoming txs and have never spent BTC.”
The positive fundamental on-chain metrics supplement the favorable technical structure of BTC. Despite different events that could have applied selling pressure on BTC, such as the BitMEX charge and OKEx withdrawal suspension, it remains above $11,400.
The BitMEX and OKEx controversy also led exchange reserves to decline sharply, possibly worrying traders. Although BitMEX swiftly processed withdrawals and OKEx wallets indicate no outflows, the regulatory uncertainty was sufficient to cause exchange reserves to slip.