Glassnode, an on-chain analytics firm, has addressed a widespread misconception regarding the supposed decline in Bitcoin’s exchange supply.
Has There Really Been a Drop in Available Bitcoin Supply?
In their latest report, Glassnode delves into a commonly held belief within the Bitcoin community about the reduction in the Balance on Exchanges during this market cycle.
The term "Balance on Exchanges" refers to a specific on-chain indicator that quantifies the total amount of Bitcoin held in wallets by centralized exchanges. Typically, investors deposit Bitcoin into exchanges primarily for selling purposes, making this balance a strong indicator of the asset’s sell supply. When this metric rises, it’s often perceived as bearish for Bitcoin’s price as it implies more investors are ready to sell their holdings. Conversely, when it falls, it’s generally seen as bullish.
Here’s a glance at the current data for Bitcoin’s Balance on Exchanges, as depicted by Glassnode’s report:
In recent months, the figures have dropped significantly. Back in July 2024, Bitcoin’s Balance on Exchanges stood at 3.1 million BTC, but it has now decreased to around 2.74 million BTC. This substantial decline has led many to suggest it’s inducing a ‘supply shock’ for Bitcoin.
However, Glassnode brings another perspective into the picture:
“Although it may appear as a supply shock instigated by individuals withdrawing coins—potentially boosting prices—we believe the bulk of this decrease is actually due to coins moving into ETF wallets held by custodians like Coinbase.”
The spot exchange-traded funds (ETFs), which were officially introduced in the US as of last year, offer a new way for traditional investors to gain exposure to Bitcoin. Due to their rising popularity, spot ETFs have started to control a large chunk of the market’s supply.
“Since the SEC gave the green light to Bitcoin Spot ETFs in January 2024, eight out of eleven spot ETFs chose Coinbase for custodial services,” Glassnode notes. “As a result, substantial amounts of Bitcoin shifted from exchange wallets to Coinbase’s institutional custodian accounts once ETF demand grew.”
Glassnode also provided data revealing the pattern in holdings by these spot ETFs:
Currently, ETFs collectively manage about 1.69 million BTC, as Glassnode highlights.
When these ETF holdings are considered alongside those of exchanges, a clearer picture emerges:
Right now, this combined total is at approximately 3.04 million BTC, mirroring the market state from early 2024, before the emergence of spot ETFs.
Given these insights, the analytics firm concludes that the observed drop in the Bitcoin Balance on Exchanges likely signifies a transformation in market structure rather than an actual decrease in available Bitcoin for sale.
Bitcoin’s Price Movements
Over the last day, Bitcoin has managed to gain about 3%, pushing its value above $105,000.
Bitcoin’s price seems to have bounced back from its recent dip, which is evident in the chart sourced from TradingView.
Featured images from DALL-E, and data charts from Glassnode and TradingView.
