• Bitcoin (BTC) balances on centralized exchanges have declined to levels last seen in 2018.
• Bitfinex attributed this to increasing usage of alternatives such as decentralized exchanges and investment funds.
• Market data shows consecutive inflows into crypto-backed investment funds, indicating renewed interest from traditional investors.
Bitcoin Balances on Exchanges Plummet
Bitfinex revealed that bitcoin (BTC) balances on centralized exchanges have retraced to levels last seen in January/February 2018. The leading cryptocurrency platform found that the balances had dropped 32% from 3.1 million BTC peak in March 2020 to 2.1 million now, with only 11% of BTC’ circulating supply being held on exchanges compared to 17% recorded in March 2020.
Bitfinex attributed the declining BTC exchange balances to the increasing usage of alternatives like decentralized exchanges (DEXs) and funds not covered in the analysis. Furthermore, it is believed that people are withdrawing their BTC from exchanges and moving coins into cold storage for long term holding purposes.
Renewed Interest From Traditional Investors
Market data shows consecutive inflows into crypto-backed investment funds, signaling that traditional investors are experiencing renewed interest in Bitcoin. This is encouraging news for the price of bitcoin as higher investor demand generally leads to an increase in its value over time.
Growing Popularity of Derivatives Trading
The popularity of derivatives trading has also been increasing, which has typically preceded a positive break for spot prices even when they continue decreasing overall. This indicates that traders are expecting bullish momentum over the mid-term future despite short term market uncertainty due to macroeconomic events like Brexit or COVID-19 pandemic related news.
The decrease in Bitcoin balance on centralized exchanges is a sign that traders are looking for alternative solutions and taking a longer-term approach by moving their coins into cold storage rather than actively trading them on the open market. At the same time, traditional investors are showing renewed interest which is likely driving up demand and positively impacting prices over time despite short term market volatility caused by external factors outside of crypto industry control