Bitcoin supply (BTC), in happy tidings of an orange Christmas, is at its lowest level for many years. CryptoRank recently tweeted that only 6.3% (or 1.3 million BTC) of total Bitcoin supply is being held on cryptocurrency exchanges.
This trend of decreasing supply is not new. It has been happening since 2020, when Bitcoin’s block reward was split in two. The decline in BTC availability on exchanges has been slowing down over the last year. In October 2020, exchange wallets were responsible for 9.5% of BTC supply, which was just before the 2020 Christmas all time highs. They also accounted for 7.3% in July. This December figure of 6.3% is the lowest since 2021.
Coinbase’s BTC wallet dominance is, however, also falling. Coinbase used to hold more BTC than any other exchanges. Over the past year, its dominance has fallen from 50.52% down to 40.65%.
This news comes as a result of a series of positive price metrics, which are in line with the rising price action for Bitcoin. First, the BTC supply is becoming illiquid for winter. The BTC supply went from being “liquid” to “illiquid” at 100,000 BTC per monthly. This means that more BTC is being stored in cold storage than it is being mined.
Glassnode, an on-chain analytics company, has shared more bullish news about exchange behavior. The 7-day moving average of BTC’s inflow volume has fallen to 978.452 BTC, a five-month low. It has been trending down each week. With less BTC being sent to exchanges, the exchange supply shortage could continue.
It’s also important to remember that BTC can be stored on exchanges by many retail investors as well as companies. This could indicate that BTC’s ‘illiquidity’ may be even lower. BTC hodlers may prefer to leave their keys in exchange custody and store their BTC in cold storage instead.
Related: Bitcoin must clear $51K in order to decrease the risk of new BTC whales sell-offs
Changpeng Zhao, Binance CEO, and co-founder, has promoted the hot wallet practice despite the best efforts by Bitcoiners Andreas Antonopolous to ensure that ‘not your keys. not your Bitcoin’ is part the daily BTC mantra.
Accordingly, 1.3 million BTC are not circulating on exchanges and could contribute to an illiquid supply.
Despite calls for a Santa Rally based on bullish analytics, bears are still not out of the woods. BullRun Invest’s Glassnode data revealed that 24.6% (or all) of the BTC supply is above $47,000.
This suggests that approximately 25% of BTC purchased at these price levels is currently underwater. BTC may not make it to the 50s if they fail to make significant progress. Tomorrow, we might have fewer presents.