Analytics firm Glassnode has revealed that exchanges have not been losing bitcoin, at least not to the degree that many previously thought.
bitcoin Exchange's reserve has only seen a minimal decline in recent years
Exchange balance, a measure of the total amount of bitcoin in the wallets of centralized exchanges, has often been a hot topic in the on-chain analytics community.
Investors use these platforms for selling purposes, so many consider the exchange balance as a kind of reflection of the “available” trading supply of the cryptocurrency.
Over the past few years, an interesting pattern has emerged in this supply found on exchanges, as its value sees a steady decline. This suggests that investors were continually withdrawing coins, decreasing the potential supply for sale of the asset.
The trend led some in the community to believe that bitcoin was heading for a supply shock. However, there was also opposition to the idea, with doubts over whether the outflows were simply the result of a change in market dynamics rather than an apparent shift towards widespread HODLing.
Glassnode's modification of one of its indicators may have put an end to the supply shock theory. As the analysis firm explained in its article Change LogCoinbase balance has been updated to include new entities.
Previously, these labels were associated with Coinbase Custody in our database. However, we have decided to stop using this distinction as the differentiation from an on-chain perspective is not always clear.
Coinbase Custody includes coins from large entities such as spot exchange-traded funds (ETFs). Therefore, the result of this change is that the Coinbase balance has seen a noticeable increase.
<img decoding="async" class="alignnone aligncenter" src="https://docs.glassnode.com/~gitbook/image?url=https%3A%2F%2F2190898932-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252F-Ldi5WtVBeQ2iFbdqJ1a%252Fuploads%252FDuW7Q5kqRDtunW9yUs6g%252Fimage.png%3Falt%3Dmedia%26token%3Dae9bf233-57c1-4336-a6cc-ffbc4e5184f1&width=768&dpr=4&quality=100&sign=1c66f966&sv=1″ alt=”bitcoin balance on Coinbase” width=”1668″ height=”860″/>
The data for the Coinbase balance both before and after the modification | Source: Glassnode
As can be seen from the chart, while the exchange rate equilibrium previously appeared to be falling, the shift has meant that its value has moved more or less sideways in recent years.
In an x x.com/_Checkmatey_/status/1807896219454525938″ target=”_blank” rel=”noopener nofollow”>mailOn-chain analyst Checkmate also brought up the issue. “Exchange balances are notoriously difficult to analyze and monitor,” the analyst says. “They are a valuable advanced metric, only if you know what you’re doing.”
As Checkmate noted, the broader chart of exchange rate balance has also been flat in recent years.
<img loading="lazy" decoding="async" class="alignnone aligncenter" src="https://technicalterrence.com/wp-content/uploads/2024/07/Exchanges-don39t-lose-Bitcoin-Glassnode-data-debunks-a-myth.jpeg" alt="bitcoin Exchange Balance” width=”1490″ height=”855″/>
How the exchange balance has changed for btc over its history | Source: x.com/_Checkmatey_/status/1807896219454525938/photo/1" target="_blank" rel="noopener nofollow">@_Checkmatey_ on x
“Many people who have been talking about endless outflows have failed to appreciate the bitcoin balance held in custody at Coinbase,” Checkmate notes. In March 2020, the exchange’s total balance was 3.146 billion btc; today, it is 2.968 billion.
There have still been net outflows since then, but the decrease is only 178,000 btc, which is not much in the grand scheme.
btc Price
At the time of writing, bitcoin is trading at around $62,700, up more than 2% from last week.
x/iXRI0WUA/” alt=”bitcoin price chart” width=”1534″ height=”854″/>
Looks like the price of the coin has been going up over the last few days | Source: BTCUSD on TradingView
Featured image by Dall-E, Glassnode.com, chart by TradingView.com
