As Bitcoin and altcoin prices continue to fluctuate due to macroeconomic and geopolitical developments, the amount of Bitcoin and Ethereum held on centralized cryptocurrency exchanges has fallen to its lowest levels in recent years.
Although this was previously seen as a strong bullish signal, experts say that has changed.
According to data shared by cryptocurrency analytics firm Santiment, Bitcoin’s supply on exchanges has fallen to around 6.6% of the total circulating supply. Ethereum, meanwhile, hit an all-time low of 4.3%. These numbers mean that the supply of BTC and ETH, respectively, has fallen to its lowest levels since 2017 and 2015.
Santiment noted that for many years the market has viewed declining supply on exchanges as an indication that investors prefer to hold their assets in their personal portfolios rather than sell them. This was interpreted as a positive price signal due to the reduced quantity of coins available for sale.
However, according to experts, the situation has changed and this assumption is no longer valid. Experts say that a decrease in Bitcoin and Ethereum balances on exchanges can no longer be considered a bullish signal in itself. They claim that due to changes in market structure, this indicator no longer has the same meaning as before.
According to experts, Bitcoin’s institutional custody services, the shift of funds to spot ETFs, staking and DeFi, as well as the growing practice of holding funds through different financial platforms make it difficult to exchange supply data solely to reflect market trends.
However, Santiment views the historically low supply of Bitcoin and Ethereum on exchanges, even if the situation changes, as a positive long-term development.
“Bitcoin and Ethereum show one of the most promising long-term signals for cryptocurrencies: the exchange supply of Bitcoin and Ethereum has fallen to historic lows.”
….This is not a guarantee that prices will rise, but it reduces the risk of a FX-driven sell-off… Low FX supply could help create a healthier foundation for crypto’s next sustainable upcycle.
Speaking to Coindesk, GoMining CEO Mark Zalan also said that a decrease in supply on exchanges has been seen before many bull markets in the past, but it is impossible to predict exactly when the current trend will reverse based on this data.
*This does not constitute investment advice.