On-chain data shows that bitcoin supply on exchanges has hit a new low for the year as investors continue to withdraw their coins.
bitcoin Exchange Reserve has been experiencing a downtrend recently
As explained by one analyst on CryptoQuant Quicktake btc-reserves-on-exchanges-hit-new-lows-for-the-year” target=”_blank”>mailThe btc exchange reserve has continued its decline recently. The “exchange reserve” here refers to an indicator that tracks the total amount of bitcoin currently held in the wallets of all centralized exchanges.
When the value of this metric increases, it means that investors are depositing a net amount of tokens into these platforms at the moment. As one of the main reasons why investors transfer their coins to exchanges is for selling-related purposes, this type of trend can lead to a bearish outcome for the asset price.
On the other hand, the indicator value heading towards a downward trajectory suggests that holders are withdrawing their btc from the custody of exchanges. This trend may be bullish for the cryptocurrency as it implies that investors are in accumulation mode.
Now, here is a chart showing the trend in the bitcoin Exchange Reserve since the beginning of the year 2024:
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As shown in the chart above, bitcoin’s exchange reserve has been declining throughout the year, implying that investors have been steadily moving their coins into self-custody.
From the chart, it is visible that a particularly pronounced downward movement in the indicator occurred when btc fell below the $60,000 level – a potential signal that these coins withdrawn from exchanges were recently purchased by their investors, who were looking to take advantage of the price drop.
The decline in the bitcoin Exchange Reserve over the past few months is naturally a positive development for the asset, as it means there are potentially fewer coins that can add to the selling pressure in the market.
But the bullish effect on price is not the only benefit for the cryptocurrency here, as the overall downward trend in the metric implies that supply is becoming less concentrated on these platforms.
Exchanges are centralized entities and when investors deposit their coins into wallets associated with them, they lose actual ownership of the coins (at least until they withdraw them), which become under the management of the platform itself.
This means that any mishap with the exchange, be it a hack or something else, also ends up affecting its users’ holdings. As demonstrated by the FTX crash in 2022, large exchanges experiencing disruption can also destabilize the entire market.
Therefore, the smaller the amount of supply these platforms have, the smaller their influence on the sector should be. From this point of view, the fact that bitcoin investors continue to deposit their coins in self-custody is naturally a constructive development.
btc Price
At the time of writing, bitcoin is hovering around $59,800, down 2% over the past seven days.
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