Bitcoin supply on exchanges decreasing, holders not selling.

On-chain data shows that the Bitcoin exchange supply has only continued to decline despite the recent rally that the asset has observed.

Bitcoin Exchange Supply Continues To Register Net Decline

According to data from the on-chain analytics firm Glassnode, exchanges have continued to see withdrawals recently. The indicator of interest here is the “exchange balance,” which measures the total amount of Bitcoin that’s currently sitting in the wallets of all centralized exchanges.

When the value of this metric goes up, it means that investors are depositing a net number of coins to these platforms currently. As one of the main reasons why holders may transfer their BTC to exchanges is for selling-related purposes, this kind of trend can have short-term bearish consequences for the price.

On the other hand, decreasing values of the indicator imply a net amount of the supply is leaving from the exchanges. Such a trend, when prolonged, can be a sign that investors are accumulating at the moment. Naturally, this could be constructive for the cryptocurrency’s price.

Now, here is a chart that shows the trend in the Bitcoin exchange balance over the last few years:

The value of the metric seems to have been going downhill in recent days | Source: Glassnode on Twitter

As displayed in the above graph, the Bitcoin exchange balance had been in an overall uptrend during 2018 and 2019, but with the COVID crash in March 2020, a shift happened in the market and the indicator started moving in a downward trajectory.

There was a break in this trend during the 2021 bull run, as the metric mostly moved sideways, with some increases coming near the top of the rallies. This deviation in the trend was possibly a result of investors depositing to take advantage of the profit-taking opportunity.

With the end of the bull market and the transition toward a bearish period, though, the indicator resumed its decline. Events like the 3AC Collapse and the FTX Crash saw the exchange balance dropping especially hard, as these platforms going down made investors more wary of keeping their coins in centralized custody.

With the start of the Bitcoin rally this year, however, the metric once again started moving sideways as demand for selling returned. In the leadup to the local top in April, exchanges were receiving net deposits as their supply outright registered an increase.

Interestingly, while investors were looking to sell during the price surge back then, the latest uplift in the price above the $30,000 level has actually seen the exchange balance only decline further.

This trend of net withdrawals can be a sign that there isn’t much appetite for selling in the market currently, at least when compared to the demand for taking coins to self-custody.

With the latest drawdown, the Bitcoin exchange balance has dropped to 2.26 million BTC, which is the lowest the indicator has been since way back in March 2018.

BTC Price

At the time of writing, Bitcoin is trading around $30,700, up 1% in the last week.

Looks like the asset has gone stale recently | Source: BTCUSD on TradingView