Recently, data from the cryptocurrency market shows that the supply of Bitcoin (BTC) on exchanges is showing a significant downward trend. This phenomenon is widely interpreted as investors gradually shifting BTC from trading platforms to private self-custodians. This behavior reflects a shift in investors’ strategies. By withdrawing tokens from exchanges, they aim to reduce the potential selling risk that may result from the convenience of platform operations and are more inclined towards long-term holding (HODLing) strategies.
Since the beginning of 2023, the trend of withdrawing BTC from exchanges has begun to emerge, when the BTC reserves on exchanges were approximately 3.2 million. Over the past year, this trend has accelerated even more as major institutional investors have deeply participated in the market. Institutional investors, with their strong financial strength and long-term investment vision, have had a significant impact on the market pattern.
Strong institutional demand for BTC is becoming a key factor driving the global shortage of BTC supply. Take industry giants like Fidelity as examples. Recently, they have significantly increased their holdings of BTC in the market. Fidelity alone purchased BTC worth as much as 253 million US dollars, a move that directly exacerbated the outflow of exchange tokens.
Dennis Porter, a senior figure in BTC, excitedly pointed out: “We have never seen this situation before.” A global shortage of BTC supply has never occurred. This is a major positive signal. Well-known Crypto asset trader Cas Abbe also shared data on social media, saying: “The supply of BTC exchanges has dropped to the lowest level since the third quarter of 2018.” As of now, only 2.5 million BTC remain on the exchange, a decrease of 500,000 compared to the fourth quarter of 2024. A few days ago, Fidelity mentioned that institutions were continuously buying and withdrawing BTC from exchanges. Supply + demand = Price explosion.
According to the latest survey by Coinbase, more than three quarters of institutional investors plan to increase their proportion of digital asset allocation by 2025. Against the backdrop of increasing macroeconomic uncertainties, many institutions have adopted BTC for portfolio diversification, using it as a hedging measure against macroeconomic fluctuations. In addition, listed companies represented by Strategy are also actively hoarding BTC. Since November 2024, these enterprises have withdrawn over 425,000 BTC from the exchange, with a cumulative holding of nearly 350,000.
The shrinking supply of BTC on exchanges has had multiple impacts on the market. First of all, the selling pressure has been significantly alleviated. Due to the significant reduction in the amount of BTC available for immediate sale, the risk of large-scale selling has decreased accordingly. This, to a certain extent, helps stabilize market prices and may even drive them up. Secondly, if demand continues to grow while supply remains constrained, the market will face a situation of supply shortage. From historical experience, such situations often lead to a sharp increase in prices. On-chain analyst Willy Woo commented, “The fundamentals of BTC have turned bullish, and the conditions for breaking through the historical high are ripe.”
The shift of investors towards self-custody and long-term holding reflects the gradual maturation of the Crypto asset market. In the current market environment, both retail and institutional investors increasingly view BTC as a strategic asset rather than merely a speculative tool.
Although the decline in the supply of BTC on exchanges is widely regarded as a bullish signal for the market, at the same time, it also means that the surge in demand may lead to an intensification of price fluctuations. In the coming weeks, the market will verify whether this supply shortage will drive a new round of upward trend in BTC prices or if market sentiment will change with the release of new macroeconomic data. Let’s wait and see.
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