Bitcoin Reserves on Exchanges at a Six-Year Low
Recent data from CryptoQuant reveals that leading crypto exchanges like Coinbase, Binance, and Kraken are holding near a six-year low of Bitcoin (BTC). This decrease in reserves coincides with the stabilization of the broader market after experiencing significant losses in August and September. Although BTC prices remain below $30,000 as of September 20, there has been notable sideways movement in recent weeks.
Bitcoin Reserves on Exchanges Falling
Currently, exchanges control around 2.09 million BTC. However, the total supply of Bitcoin is set to reach 21 million coins. As of now, more than 19.7 million BTC are already in circulation, with public firms like Tesla and MicroStrategy actively accumulating Bitcoin. While individuals can hold cryptocurrencies in non-custodial wallets or exchanges like Binance and Coinbase, exchanges offer custodial wallets for users to trade or hold their coins. Despite the bullish appearance of decreasing exchange reserves, it doesn’t guarantee price recovery.
SEC and Regulators Crackdown
The number of Bitcoin held in exchanges has been declining since 2022, with a more rapid drop in late 2022 following the collapse of FTX exchange. Although outflows slowed down after some US regional bank collapses in Q1 2023, the decline has continued. This can be attributed to both the bear market and increased regulatory pressure from the United States Securities and Exchange Commission (SEC) on Binance and Coinbase. Both exchanges were sued by the SEC for allegedly issuing unregistered securities. The crackdown has led to staff resignations, layoffs, disruption of operations, and a significant drop in trading volume for Binance US.
Hot Take: Decreasing Exchange Reserves Reflect Regulatory Concerns
The decrease in Bitcoin reserves held by exchanges can be seen as a reflection of the current regulatory environment and the fear it has instilled in traders and Bitcoin holders. As a protective measure, more individuals are securing their coins in non-custodial wallets, leading to a contraction in exchange reserves. While this may signal a firming market, it doesn’t guarantee price expansion. The ongoing SEC crackdown on exchanges like Binance and Coinbase has further contributed to the decline in reserves as regulatory scrutiny increases. It remains to be seen how these developments will impact the crypto market moving forward.
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