Bitcoin exchanges now hold the same share of Bitcoin supply as they did during the late 2017 all-time high, indicating a potential shift towards true price discovery. Recent data from on-chain analytics firm Glassnode reveals that less than 12% of the total BTC supply resides in exchange wallets. This decline in exchange balances aligns with a long-term trend of coins leaving exchanges since late April.
On July 10, only 11.59% of the available BTC supply was held in known exchange wallets, marking the lowest level since December 2017 when Bitcoin reached its previous peak at $20,000. William Clemente, co-founder of Reflexivity Research, highlighted this milestone, emphasizing that exchange balances have dropped to a level seen over five years ago.
Examining Coinbase as an example, Joe Burnett, head analyst at Blockware, pointed out that BTC balances on the platform have more than halved since the market crash in March 2020. This decreasing trend of exchange balances has led to speculations that Bitcoin is approaching a phase of true price discovery, according to Burnett.
The declining supply on exchanges coincides with the emergence of new Bitcoin whale entities, which are accounts holding substantial amounts of BTC outside of exchanges. Since late April, approximately 40 new whales have emerged, reaching their highest numbers since the FTX meltdown in November of the previous year. These developments align with expectations of a potential BTC price squeeze due to diminishing supply and increasing buyer demand.
Although most exchanges are experiencing a decrease in BTC balances, one exception is mining pool Poolin, which continues to transfer significant amounts of BTC to Binance. Apart from the declining supply dynamics, the anticipation of regulatory approval for a Bitcoin spot price exchange-traded fund (ETF) in the United States further contributes to the bullish sentiment surrounding Bitcoin.
As the Bitcoin market evolves, advancements such as artificial intelligence (AI) are also expected to impact the market over time. Consequently, the decreasing BTC supply on exchanges combined with increasing buyer demand and the possible approval of a Bitcoin ETF indicate a promising outlook for Bitcoin’s price trajectory.
Disclaimer: This article does not provide investment advice or recommendations. Readers should conduct their own research before making any investment decisions.