Bitcoin Supply on Exchanges Hits Lowest Ratio Since December 2017, Signaling Increased Interest in Self-Custody

Bitcoin Supply on Exchanges Hits Lowest Ratio Since December 2017, Signaling Increased Interest in Self-Custody

Bitcoin supply on exchanges reaches its lowest ratio since December 2017, indicating a rising interest in self-custody and potentially making it easier for the price to rise if demand grows.

The cryptocurrency market is undergoing a notable shift in trading patterns as the amount of Bitcoin held on exchanges reaches its lowest ratio since December 2017, indicating a growing interest in self-custody among traders. This shift suggests a reduced supply of Bitcoin available for sale on the market, potentially making it easier for the price of BTC to rise if demand continues to grow.

Cryptocurrencies, particularly Bitcoin, have always been closely associated with the principles of decentralization and autonomy. Self-custody, which involves securely storing one's own digital assets, aligns with these principles by ensuring that traders have full control over their cryptocurrency without relying on third-party services like exchanges.

According to data from Coinpaprika, the total balance of Bitcoin held on all exchanges was 1.13 million BTC as of May 9, 2023, reflecting a decrease of nearly 15% since May 7, 2023. This accounts for approximately 6% of the total Bitcoin supply, which currently stands at around 18.8 million BTC. The last time the ratio of Bitcoin on exchanges was this low was in December 2017 when Bitcoin reached its all-time high of nearly $20,000 per coin.

Data from the crypto analytics platform reveals that only 5.84% of the total Bitcoin supply is currently held on cryptocurrency exchanges. It's important to note that data may vary across platforms due to potential differences in how exchange wallets are identified.

The decline in Bitcoin supply on exchanges indicates that more users are opting to hold their coins for the long term instead of returning them to exchange wallets for selling purposes. This trend could signify an increased confidence and interest in Bitcoin as a store of value and a hedge against inflation, particularly amidst ongoing economic uncertainty and monetary stimulus measures.

One possible reason for this shift is the collapse of FTX, which led many users to lose trust in centralized platforms for holding their funds, especially if they are not actively engaging in trading activities.

Former Goldman Sachs executive Raoul Pal recently expressed an optimistic outlook on the trajectory of the cryptocurrency markets. He expects the crypto sector to rebound from its current bearish state faster than it did in 2019, anticipating significant growth within the next six months.

However, a survey conducted by Goldman Sachs has shown a notable decline in enthusiasm for cryptocurrencies among wealthy family office investors. This decline is attributed to the high volatility experienced in the crypto market over the past year.

The decreasing supply of Bitcoin on exchanges reflects a broader trend towards self-custody and long-term investment strategies. As more individuals take control of their digital assets, the concept of self-sovereignty and decentralized finance gains prominence within the cryptocurrency ecosystem. While the shift in trading patterns may impact short-term liquidity on exchanges, it also reinforces the fundamental principles that underpin cryptocurrencies and highlights the increasing importance of self-custody in the evolving landscape of digital finance.