On-chain data shows that Bitcoin transaction supply has recently resumed a downward trend after deviating from an upward trend earlier.
Bitcoin supply percentage on exchanges has dropped to 11.8%
As analysts noted in an article X, BTC exchange supply is back to year-to-date (YTD) lows. The relevant metric here is “Exchange Balance %,” which tracks the total percentage of Bitcoin supply currently held in all centralized exchange wallets.
When the value of this indicator rises, it means that investors are depositing net amounts of cryptocurrency into these platforms. Since one of the main reasons why investors make such transfers is for the purpose of selling, this trend could have a potential bearish impact on the coin.
On the other hand, a decrease in the value of this metric means that holders are moving their tokens from these central entities to their self-custodial addresses. Generally speaking, investors who exhibit this behavior plan to hold for the long term, so this trend may be positive for prices in the long run.
Now, the chart below shows the trend in exchange Bitcoin balance percentage since the beginning of 2023:
The value of the metric seems to have been going down during the past few months | Source: @jimmyvs24 on X
As shown in the chart above, the percentage of Bitcoin supply on exchanges has been rising in the first few months of the year as BTC rebounded. These deposits were most likely made by sellers hoping to make a profit.
However, exchange supply has been on a steep downward trend since June, meaning investors have been consistently withdrawing their tokens from these platforms.
Interestingly, though, Bitcoin initially observed a further upward trend during this period, suggesting that longs were outweighed by any profit-making sellers looking to take advantage of the opportunity.
In early September, the indicator reversed the trend, with net deposits on exchanges standing at approximately 25,000 BTC. However, this rise was short-lived as the indicator has since retreated.
Today, the percentage of Bitcoin supply on exchanges has touched the 11.8% mark, which is the lowest value observed so far this year. Naturally, this means that the previous advance has completely retraced.
It’s difficult to say what consequences these ongoing divestments may have on the cryptocurrency in the short term, as net outflows over the past few months have failed to save the asset from losses.
However, supply’s continued move toward self-custody is certainly a constructive sign in the long term, as it leads to tokens becoming more decentralized.
As last year’s chaos of major platform bankruptcies like 3AC and FTX taught us, the fewer tokens on these central entities, the better for market stability.
Bitcoin’s rally has hit a brake recently as the cryptocurrency has been unable to sustain a breakout to higher levels. Currently, the coin is trading at $27,100.
Looks like BTC is still floating above the $27,000 level | Source: BTCUSD on TradingView
Featured images from Kanchanara on Unsplash.com, charts from TradingView.com, Glassnode.com