The amount of bitcoin held on exchanges has dropped to around 2.58 million BTC, according to data from Glassnode, as the price of the asset lingers around the $62,300 mark.
Bitcoin exchange reserves refer to the total amount of BTC held in wallets controlled by cryptocurrency exchanges. Currently, this metric is sitting at the lowest level since 2018, despite the price of bitcoin increasing more than 100% year-to-date.
Pseudoymous crypto analyst “The DeFi Investor” highlighted that as bitcoin’s price started to rally higher in February, around $31 billion worth of BTC left exchanges.
“Most people underestimate how big the demand for Bitcoin is,” said The DeFi Investor.
Falling exchange reserves is typically perceived as a sign of demand because it might imply that a lower number of coins on exchanges signals a lack of intent to sell coins.
In the past, this behaviour is associated with retail investors shifting to holding for the long-term and market participants increasingly turning to cold storage solutions.
However, this bitcoin market cycle has another investor cohort worth watching: institutional investors. U.S. listed spot bitcoin exchange-traded funds (ETFs) now hold 4.6% of bitcoin’s supply, worth around $58 billion.
On Monday, spot bitcoin ETFs recorded $235.2 million worth of inflows, with BlackRock and Fidelity leading the charge, with $98.7 million and $103.7 million worth of inflows respectively.
With exchange reserves falling as institutional investors continue to grow their bitcoin ETF positions, some traders have speculated that a supply shock is imminent.
