Only 5.8% BTC in Circulation Remains on Exchanges, Price Struggles

Summary of the Article

  • Crypto analytics platform Santiment has found that only 5.8% of total Bitcoin (BTC) supply sits on exchanges, which is the lowest level in six years.
  • This shows that investors have not regained their confidence and trust in centralized platforms, and prefer cold storage options and self-custodial methods.
  • The outflow of BTC from major exchanges increased following the collapse of one crypto exchange in November 2022.

Low Supply of BTC on Exchanges

Crypto analytics platform Santiment has found that bitcoin (BTC) supply on exchanges has plummeted to its lowest level in roughly six years. On-chain data analyzed by the firm shows that only 5.8% of the total BTC supply sits on trading platforms, and this level was last seen on December 17, 2017. This low level of BTC supply on exchanges shows that asset’s holders have not regained their confidence and trust in centralized platforms. They still prefer cold storage options and self-custodial methods.

Increase Outflow from Exchanges

The outflow of BTC from major exchanges increased following the collapse of one crypto exchange in November 2022. FTX imploded and filed for bankruptcy, dragging other crypto firms with it and leaving users and their assets in limbo. This led to increased BTC outflows from major exchanges, including Binance – the world’s largest platform. Investors began to opt for self-custodial methods during Q4 2022 resulting a dip in BTC supply on such platforms to 7%. By May 2023, the supply had plunged further down to 6%, currently around 5.8%.

„Trust“ Issue Affecting Price?

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Despite this decreasing trend in Bitcoin’s circulation across existing networks, however, its price continues to struggle as it remains below $12K since mid July 2020. Might this be an indicator that investors are continuing to abstain from trusting centralized cryptocurrency networks? It remains uncertain at present how much influence such trust issues have over Bitcoin’s current value levels or if there are other fundamental factors at play here instead .

„Long Term HODLers“ & Self Custody

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It might be useful then to look at another metric indicating investor behaviour – namely long term ‚HODL’ers‘, or those who hold onto their coins for extended periods rather than trade them frequently or actively participate within markets . In terms of these types of users amongst Bitcoin’s community it appears they continue to grow too despite market adversity as recently reported by Coinmetrics . These figures stand at around 63% as per recent analysis which suggests a strong core base among current holders which could potentially provide some assurance toward more bullish sentiment amid current price stagnation . With more users seeking out self custody solutions also , both through hardware wallets like Trezor & Ledger , but also via new non custodial services being offered by firms like River Financial & Unchained Capital , we can see increasing evidence towards a shift away from traditional models & instead toward more decentralized protocols .

„Institutional Players“?

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Finally another factor often cited as having potential for fueling further growth within cryptocurrencies is institutional adoption – something which many commentators believe may soon start taking place en masse given greater regulatory clarity & likely potential for high returns amid what is a still relatively nascent asset class . As yet no major indication exists as too when this may take place however so until then it seems likely price action will remain somewhat subdued until either market exuberance takes precedence once again or specific news stories emerge signaling greater interest among institutional players moving forward . All things considered though , ongoing trends such as those described above seem encouraging for any believers looking toward a brighter future ahead for cryptocurrencies overall .