- Since 2020, BTC supply on exchanges has fallen by up to 25%.
- This figure is likely to increase thanks to the entrance of major institutions like BlackRock and Fidelity into the cryptosphere.
- In a strange twist, banks are starting to change their tune on BTC, requesting that the SEC make access to and holding the digital currency easier.
Bitcoin has enjoyed a terrific start to 2024. The world’s largest cryptocurrency entered the year with speculation circling a possible spot ETF approval – which was proven true on the 11th of January as the Securities and Exchange Commission (SEC) greenlit crypto fund trading. After kicking off 2024 at a solid price of USD $42K (AUD $64K), the coin has surged around 25% to currently sit at a 24-month high of USD $52K (AUD $80K). Financial giants entering the crypto game have had several effects on the market, including an influx of money entering the sector. But there’s been one factor that nobody really considered – BTC exchange supply is drying up.
BTC Levels on Exchanges Lowest in Four Years
According to a glassnode graph documenting the number of BTC held on crypto exchanges, supply is at the lowest it’s been since July 2020. All up, there is nearly 25% less BTC available on exchanges (either in wallets or up for trade) than there was four years ago – despite thousands more BTC theoretically entering circulation since then.
Even before the spot ETF approval, Bitcoin held on exchange was rapidly diminishing. This may have been spurred on by the disastrous collapse of FTX in 2022, causing investors to reconsider custody of their digital assets. However, more broadly, it speaks to the fact that BTC holders are in it for the long-haul, locking the digital currency in their wallets rather than leaving it on an exchange for easy trade.
Most spot ETF brokers are likely to hold BTC (that backs their funds) through safe custodial means like a mix of hot and cold wallets. So the more people that invest in spot ETFs, the less BTC supply on crypto exchanges.
Banks Want in on the Action Too
A few months ago, if you were to ask the question “Who do you think hates Bitcoin more: Gary Gensler or banks?” you’d struggle to find a conclusive answer. However, the institutional paradigm is clearly shifting – to the point that the banks themselves sent an open letter asking the SEC to make holding BTC easier. Essentially, they are asking the regulatory body to revisit and amend Bulletin number 121, which outlined how crypto asset holdings should be reported and safeguarded by banks.
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