Bitcoin exchanges are experiencing a significant drop in Bitcoin reserves as investors withdraw Bitcoin to cold storage.
Since February 2020, Bitcoin reserves held on some of the biggest trading platforms has dropped 187,000 bitcoins, worth $2.1 billion at today’s price.
The biggest exchange in terms of Bitcoin stored Coinbase has experienced a 9% drop in holdings since February 2020. Back then, the exchange had 1 million bitcoins under management, but according to recent data 92,000 bitcoins have been withdrawn since.
Other top exchanges have also seen bitcoins drained from their cold wallets signalling a growth in investors rather than traders in the Bitcoin space.
Huobi has the second largest Bitcoin under management, and it has seen 53,000 bitcoins withdrawn from its platform since the start of Q3.
And in the same time period, other Asian exchange giant Okex has seen 17.5% of its bitcoins withdrawn from its cold wallet, some 42,000 bitcoins net withdrawal in just three months.
Although Binance and Bitfinex have seen smaller percentage withdrawals they are also at a net loss for their Bitcoin under management.
This is apparent throughout the exchange and trading platform space. With its recent troubles, Bitcoin derivatives platform BitMEX has also seen a significant drop in its Bitcoin holdings.
Since the CFTC indicted BitMEX on charges of illegally operating an unregistered trading platform, BitMEX has seen its Bitcoin holdings drop from 224,000 to 113,000 bitcoins – staggering 49.55% drop.
According to data from crypto statistic site Glassnode, there are 2.7 million bitcoins held on exchanges today, or about 14.59% of the circulating supply of bitcoins.
That’s down from 2.97 million bitcoins in February 2020 when Bitcoin exchanges held their biggest amount of Bitcoin.
With a significant drop in exchange’s Bitcoin reserves, it means only one thing: investors are preferring to hodl long term rather than speculate on Bitcoin price swings.
And recent data suggests there are more Bitcoin hodlers than previous halving cycles, which suggests less Bitcoin in actual circulation will lead to higher price booms.
Analyst Willy Woo calls it ‘reflexivity’ and says Bitcoin investors’ tendency to hold onto their Bitcoin, helps the price rise even without the necessity of more percentage of capital growth.
‘While we now need more capital invested to get similar % gains in price,’ tweeted Woo. ‘The effect of HODLers holding onto coins tighter is magnifying “number go up” per dollar invested.’
It’s an alternative way to gauge the hodling activity of retail investors. And instead of extra capital needed in line with market cap growth to boost Bitcoin’s “natural” price growth, hodlers are tightening the reigns. A classic case of demand outstripping supply.
With Bitcoin investors withdrawing Bitcoin en masse, it shows hodl mentality is taking over the narrative.
And with corporate money now flooding the Bitcoin space, we should expect this trend to continue.
There’s a saying in the Bitcoin space, ‘Not your keys, not your bitcoins.’ And although there’s still an uncomfortable amount of bitcoins sitting in exchange wallets, more investors are choosing to hodl.
Whether it’s down to financial self sovereignty or just bullish for Bitcoin’s long term valuation, it’s bullish.
There will always be speculators and traders, but huge exodus of bitcoins from exchanges shows how the Bitcoin space is maturing.
Author: Tommy Limpitlaw
A Bitcoiner since 2017 and a Bitcoin Maximalist since 2018, Tommy is our main writer and editor at Bitcoin Maximalist. Other than researching and writing about Bitcoin, Tommy loves spending time with his family and supporting his beloved Leeds United.
