Bitcoin on exchanges continues to slide, 1 million BTC withdrawn from these platforms
Bitcoin is trending sideways in its current range, the cryptocurrency managed to prevent another attack from the bears, but uncertainty remains strong in the market. This status quo supports the price action and it could act as the dominant trend for the rest of the year.
At the time of writing, Bitcoin is trading at $16,400. The cryptocurrency has been stuck at these levels for today’s trading session after testing its yearly lows yesterday. In the wake of FTX’s collapse, crypto users have lost confidence. This can have a long-lasting impact on the nascent asset class.
Bitcoin holders are fleeing exchanges
Data from crypto exchange Bitfinex indicates that users are withdrawing Bitcoin from exchanges en masse. FTX’s collapse triggered a massive BTC outflow from trading venues; investors fear losing their money in the contagion.
The chart below shows that the exchange’s BTC supply has been declining since mid-2021. This trend permeated 2022 when the crypto market crashed, and Bitcoin lost over 80% of its value from its all-time high of $69,000.
Less Bitcoin on trading venues is a good thing in another market. Market participants took this as a bullish sign as people and institutions cannot sell their BTC. Thus, bullish price momentum has fewer chances to face resistance.
However, the current market conditions are different. The decrease in Bitcoin supply on exchanges may indicate problems for the crypto market.
As Bitfinex noted, crypto exchange Gemini has seen the most significant drop in BTC supply. The exchange saw Bitcoin reserves fall from 210,000 BTC to 163,000 in a week. Overall, trading venues lost over 1 million BTC in the last month. The report claims:
These data suggest that a mass exodus of retail trading outside of centralized exchanges is underway. Any development that suggests a particular stock exchange is in trouble is a catalyst for emptying the balances on exchanges. This trend has been in place since the FTX insolvency rumors first surfaced.
Throw in the towel
Additionally, to the decline in BTC supply, the report noted despondency among retail investors. These users may leave the crypto space for good after taking a hit on FTX.
The report noted that there was no increase in self-deposit balances, as measured by the Whalemap monitor. The report noted:
Whale bubbles (1-10,000 BTC balance) serve as local support and resistance, but the BTC whales have sold and their current wallet balance does not compensate for the exchange (…). The takeaway for investors is that while one might consider the many black swan events behind us, selling pressure from HODLers and whales is still increasing.
