The Decline of Bitcoin Balances on Exchanges
The latest weekly publication of Bitfinex reveals a significant decrease in bitcoin (BTC) balances on centralized exchanges. The balances have plummeted by 32% from their peak in March 2020, indicating a trend of people withdrawing their BTC from exchanges. At present, only 11% of BTC’s circulating supply is found on exchanges, a considerable drop from the 17% recorded in March 2020.
Main Points:
- Bitcoin balances on exchanges have dropped by 32% since March 2020.
- Only 11% of BTC’s circulating supply is currently on exchanges.
- Decreasing exchange balances are attributed to the rise of decentralized exchanges and increased usage of cold storage.
- Crypto-backed investment funds are experiencing consecutive inflows, indicating renewed interest from traditional investors.
- Bitfinex believes that outflows from short-Bitcoin funds could lead to a breakout towards the upside.
The Rise of Decentralized Exchanges and Cold Storage
Bitfinex attributes the decline in BTC exchange balances to the growing popularity of decentralized exchanges (DEXs) and the movement of coins to cold storage. This shift suggests that longer-term holders are choosing to accumulate rather than trade. The increased participation in the derivatives market also indicates a potential upward break in spot prices.
Renewed Interest from Traditional Investors
Market data shows a consecutive inflow of funds into crypto-backed investment funds, with a significant portion directed towards Bitcoin-backed entities. This signals a renewed interest in bitcoin from traditional investors, as they increase their demand for the asset. Coinshares’ analysis reveals that crypto funds have seen a net inflow of $137 million in the past week, with $742 million inflows over four weeks, the highest since Q4 2021.
The Uncertain Path for Bitcoin
While BTC exchange balances decline, Bitfinex highlights some unusual whale activity within a 72-hour period. However, it was found that the U.S. Department of Justice was moving their seized BTC stash from the darknet marketplace Silk Road, and the activity was not indicative of new selling pressure. Currently, BTC has been trading in a tight range for over 33 days, suggesting a struggle between bulls and bears. Bitfinex believes that outflows from short-Bitcoin funds could potentially cause a breakout towards the upside, but the direction of the leading cryptocurrency remains uncertain.
Hot Take
The decline in bitcoin balances on exchanges reflects a shift towards decentralized exchanges and cold storage, indicating longer-term investors’ preference to accumulate rather than trade. The consecutive inflows into crypto-backed investment funds suggest a renewed interest from traditional investors in bitcoin. While the path for bitcoin remains uncertain, the outflows from short-Bitcoin funds could potentially trigger a breakout towards the upside.
By
By
By
By
By