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Bitcoin Supply Dynamics: Decline in Exchange Balances

Bitcoin supply dynamics are showing a promising trend for Bitcoin bulls as the percentage of BTC held on exchanges has declined.

Table of Contents

Introduction

Bitcoin supply dynamics are showing a promising trend for Bitcoin bulls as the percentage of BTC held on exchanges has declined significantly. On-chain analytics firm Glassnode’s data confirms that less than 12% of the total BTC supply currently resides in exchange wallets. The decline in exchange balances reflects a pattern similar to the BTC price rally observed in 2017.

 

BTC Supply Shifts to Non-Exchange Wallets

Bitcoin’s recent price surge has sparked a renewed interest in the cryptocurrency, resulting in a substantial amount of BTC being withdrawn from exchanges. Since late April, there has been a consistent trend of coins leaving exchange wallets.

However, the most recent figures reveal a noteworthy milestone: as of July 10, only 11.59% of the available BTC supply is held in known exchange wallets, marking the lowest level since mid-December 2017 when Bitcoin reached its previous all-time high of $20,000.

 

BTC Balances Comparable to March 2018 Levels

The decline in BTC supply on exchanges is further illustrated when comparing the current balances to previous periods. Exchange wallets now hold a total of 2.252 million BTC as of July 10, a level similar to that observed in March 2018. For example, Coinbase, one of the leading cryptocurrency exchanges, has experienced a reduction of more than 50% in its BTC balances since the market crash in March 2020.

 

Increasing Bitcoin Whales

The diminishing supply of BTC on exchanges has coincided with a notable increase in the number of Bitcoin whale entities, which refers to individuals or entities holding substantial BTC balances outside of exchanges. Since late April, approximately 40 new whales have emerged, and as of July 7, their numbers reached the highest level since the FTX meltdown in November of the previous year.

The growing presence of Bitcoin whales suggests incresead buyer demand and further strengthens the expectation of a BTC price surge. Furthermore, market participants anticipate the potential approval of a Bitcoin spot price exchange-traded fund (ETF) in the United States, which could create additional buying pressure and contribute to a squeeze in BTC supply.

 

Mining Pool Poolin’s Unique Behavior

Despite the overall trend of declining exchange balances, there is an intriguing exception in the form of mining pool Poolin. This mining pool continues to transfer significant amounts of BTC to Binance, deviating from the broader pattern of BTC leaving exchanges. The reasons behind this unique behavior are yet to be fully understood, and it will be interesting to see how it impacts the overall BTC supply dynamics in the future.

 

Conclusion

In conclusion, the BTC supply dynamics are currently favoring Bitcoin bulls, as the percentage of BTC held on exchanges has reached a multi-year low. Additionally, the rising number of Bitcoin whales and the potential approval of a Bitcoin ETF contribute to the bullish sentiment surrounding the cryptocurrency. As the BTC supply landscape continues to evolve, it remains crucial for investors and market participants to closely monitor these trends and their potential implications for the future of Bitcoin.

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