Are Bitcoin Holders Exiting US Exchanges? What the data says
On-chain data shows that the Bitcoin exchange reserve ratio for US versus offshore platforms has continued to decline recently. Here’s what this tells us.
The Bitcoin Exchange Reserve Ratio has been falling for a while now
As explained by an analyst in a CryptoQuant post, the BTC reserve of the US-based exchanges is decreasing. The “exchange reserve” is an indicator that measures the total amount of Bitcoin currently sitting in the wallet of a centralized exchange or group of such platforms.
The calculation of interest here is actually not the currency reserve, but the “currency reserve ratio.” As this indicator’s name suggests, it tells us about the relationship between the currency reserves of two given sets of platforms. In the context of the current discussion, the two sets of exchanges are the US and foreign platforms.
When the value of this ratio increases, it means that the number of coins sitting on the US-based platforms increases in relation to the supply on the offshore exchanges. This naturally means that the American platforms receive a higher number of deposits (or just lower withdrawals) than the foreign ones.
On the other hand, the value of the calculation suggests that the global platforms are seeing higher growth in their reserves than the US-based exchanges at the moment.
Now, here’s a chart showing the trend in the Bitcoin exchange reserve ratio for US vs offshore platforms over the last couple of years:
The value of the metric seems to have been going down in recent days | Source: CryptoQuant
As you can see in the graph above, the Bitcoin currency reserve ratio for these two sets of platforms has been falling since the first half of 2022. This means that the supply on the US-based exchanges has been constantly decreasing compared to that on the foreign platforms.
The decline has been particularly sharp during major crashes where some major platforms have gone bankrupt and R&D has spread throughout the market, causing investors to withdraw their coins from centralized exchanges.
While these crashes may have caused temporary accelerations in the drawdown, the total exchange supply of Bitcoin has been in a state of decline for a long time now. The decline has also been a market-wide phenomenon, which means that all exchanges see a contraction in supply.
But taking into account that the foreign exchange reserve ratio has continued to decline, it means that the decline has been particularly sharp for the US-based platforms. This would mean that investors have fled US stock exchanges at a faster rate during this period.
“Due to regulatory requirements, US investors may no longer have as much faith in exchanges and would rather move their coins to offshore exchanges or wallets,” explains the quant. “If American politicians put pressure on this industry, they risk falling behind the rest of the globe.”
BTC price
At the time of writing, Bitcoin is trading around $28,500, up 4% in the past week.
BTC has plummeted in the last 24 hours | Source: BTCUSD on TradingView
Featured Image by Kanchanara at Unsplash.com, Charts by TradingView.com, CryptoQuant.com
