Bitcoin balances on centralized exchanges have reached their lowest levels since early 2018, according to a recent report by Bitfinex. The report highlights a 32% decrease in BTC balances from the peak of 3.1 million BTC in March 2020 to the current 2.1 million BTC. This means that only 11% of the circulating supply of Bitcoin is currently held on exchanges, a significant drop from the 17% recorded in March 2020.
The decline in BTC exchange balances can be attributed to several factors. One major factor is the increasing usage of decentralized exchanges (DEXs) and other alternative platforms. Additionally, the movement of users withdrawing their Bitcoin from exchanges has contributed to the decrease in balances. This trend indicates a shift towards long-term holders moving their coins to cold storage, which is seen as a positive sign for the price of Bitcoin.
Bitfinex believes that the decrease in exchange balances and the growing participation in the derivatives market could lead to a breakout in the price of Bitcoin. The platform suggests that more investors are showing a desire to accumulate Bitcoin rather than actively trading it.
In line with the decreasing exchange balances, there has been a renewed interest in Bitcoin among traditional investors. Recent data shows consecutive inflows into crypto-backed investment funds, with the majority of assets directed towards Bitcoin-backed entities. Coinshares’ latest analysis reveals a net inflow of $137 million into crypto funds last week, with gross BTC inflows totaling $742 million over the past four weeks.
While Bitcoin balances on exchanges have been decreasing, Bitfinex has noticed some unusual whale activity within a 72-hour period. This activity initially raised speculation about potential selling pressure. However, further analysis revealed that the U.S. Department of Justice was moving its seized BTC stash from the darknet marketplace Silk Road.
Despite these developments, Bitcoin has been trading within a tight range of $29,500 and $31,500 for over 33 days, indicating a struggle between bulls and bears. The next direction for Bitcoin’s price remains uncertain, but Bitfinex suggests that outflows from short-Bitcoin funds could potentially lead to an upward breakout.
Overall, the decrease in Bitcoin balances on exchanges, coupled with the growing interest from traditional investors, indicates a shifting landscape for the cryptocurrency market. As more users opt for decentralized exchanges and long-term storage, the market dynamics for Bitcoin are evolving, potentially setting the stage for further price movements in the near future.
