In glad tidings for an orange Christmas, Bitcoin ($BTC) supply is drying up to lows not seen for years. In a recent tweet by CryptoRank, just 6.3% of the total Bitcoin supply, or 1.3 million $BTC, is held on cryptocurrency exchanges.?
The decreasing supply is nothing new, trending down since the Bitcoin halving in 2020 when the $BTCblock reward was cut in two. $BTCavailability on exchanges followed suit, slowly trending down over the past year. Exchange wallets accounted for 9.5% of the $BTCsupply in October 2020, just before the 2020 Christmas all-time highs, and 7.3% in July this year. The 6.3% December figure is the lowest recorded in 2021.
Interestingly, Coinbase’s $BTCwallet dominance is also slipping. The American exchange used to custody more $BTCthan all other exchanges combined. Its dominance has slipped from 50.52% to 40.65% over the past year.
The news follows a swathe of positive price metrics that dovetail the upward price action of Bitcoin. Firstly, the illiquid $BTCsupply has iced over for the winter as the $BTCsupply going from a "liquid" to an "illiquid" state is now 100,000 $BTCper month. In essence, more $BTCis locked away into cold storage than the amount being mined.
Glassnode, the on-chain analytics company, shared further bullish news regarding exchange behavior. The seven-day moving average for $BTC’s exchange inflow volume just reached a 5-month low of 978.452 $BTCand has been trending down week on week. The exchange supply shortage may continue with less and less $BTCsent to exchanges.
Furthermore, it’s important to note that many retail investors and some companies store their $BTCon exchanges, indicating that the ‘illiquid’ $BTCmay be even lower. Some $BTChodlers would leave the custody of their keys to exchanges instead of taking their $BTCoffline into cold storage.
Related:?Bitcoin needs to clear $51K to reduce the chance of new sell-off from $BTCwhales
Unsurprisingly, Binance CEO and co-founder Changpeng Zhao has encouraged the hot wallet practice, despite the best efforts of Bitcoiners like Andreas Antonopolous ensuring ‘not your keys, not your Bitcoin’ is part of everyday $BTCmantra.
As a result, while 1.3 million $BTCrests on exchanges, they may not be ‘circulating’, and may in fact contribute to the illiquid supply.
Nonetheless, despite calls for a “Santa Rally” off the back of bullish analytics, the bears are not yet out of the woods. A tweet by BullRun Invest using Glassnode data shows that 24.6% of all $BTCsupply is sitting above the price of $47,000.
It suggests that roughly a quarter of the $BTCbought at those price levels are currently underwater. If $BTCfails to make progress into the 50s, there may be fewer presents under the tree tomorrow.