Bitcoin exchange supply drops amid push towards self-custody

According to data from the on-chain analytics firm Santiment, only $29.2 billion worth of BTC is left on exchanges now

On-chain data shows Bitcoin supply on exchanges has reduced recently as holders have been pushing towards self-custody.

As per data from the on-chain analytics firm Santiment, BTC worth only $29.2 billion is left on exchanges currently. There are two relevant indicators here: the ‘supply on exchanges’ and the ‘supply outside of exchanges.’

As their names already suggest, they measure the total amount of Bitcoin currently available in centralized exchange wallets and the supply being kept in self-custodial wallets, respectively.

Generally, one of the main causes investors deposit to exchanges is for selling purposes, so the supply on exchanges can reflect Bitcoin supply available for selling.

So, whenever the value of this metric rises, there is a possibility that the selling pressure in the market also rises, and BTC sees a bearish impulse. Likewise, if it drops instead (which means the supply outside of exchanges increases), the price of BTC could see a bullish impact over the long term.

Previously, investors used to believe that a supply shock could brew in the market if the supply on exchanges significantly dropped. But now days, the market environment is more diverse, so exchanges play a minor role.

The most notable drop during 2022 came after the collapse of the crypto currency exchange FTX, which forced investors to review their trust in centralized platforms, resulting in many of them withdrawing huge sums to self-custodial wallets. Only users hold the private keys to these wallets.

The drawdown of the indicator has continued during the recent times while crypto currency price has been consolidating sideways near the $23,000 level. This may indicate that some new accumulation has taken place at this level.

With the current continuation of the decline, the supply of BTC on exchanges, as measured by Santiment, has dropped to just 1.27 million. The supply outside of exchanges has naturally increased while this has happened and has reached a new all-time high level of 18.12 million BTC.