key takeaways
- Bitcoin balances on exchanges continue to decline, now at lowest level since December 2017
- Meanwhile, long-term investors continue to soak up supply
- Coins that haven’t been touched in 10 years now outnumber coins held on exchanges
I wrote an article last week on the exodus of stablecoins from exchanges, with balances currently at their lowest since October 2021, with stablecoins accounting for 45% of the total balance on exchanges over the past four months.
But the glut of liquidity is not limited to stablecoins. Funds are being withdrawn even in the world’s largest cryptocurrency. only 11.8% of the total Bitcoin Supply is currently on exchanges – the lowest it has been since December 2017.
In your memory, December 2017 was the last bull market peak. Bitcoin soared within a hair of $20,000 before plunging into a two-year bear market that devastated the entire industry.
Since January 2020, exchanges’ bitcoin reserves have only been going one way: down. It hints at the demand/supply imbalance that so many bitcoin truthers advocate for, along with the much-anticipated hard supply cap of 21 million coins for bitcoin.
They argue that if demand continues to rise, the price can only increase because the supply cannot keep up.
Central to this thesis is the flexibility of long-term holders to maintain a firm hold on their bitcoins. And when assessing whether they have, the answer is a resounding yes.
The chart below presents the long-term holders against total exchange balances. In November 2022, the number of active bitcoins will surpass the number of bitcoins on exchanges 10+ years ago.
Of course, some of these long-term holders will be lost coins, either through the death of their owner or the loss of their private keys.
But the stat is still interesting and speaks to a group of (very) early investors in bitcoin who clung to their coins with all their might. Remember, this includes the anonymous Satoshi Nakamoto, who is estimated to own over 1 million coins, or 5% of the total supply.
The chart below displays the current portion of the bitcoin supply divided by time and compared to exchange balances.
The result is interesting, but even more so when considering that the past three years saw bitcoin hitting both highs around $70,000 during the pandemic and then a bone-crushing plunge towards $15,000 by 2022.
In terms of the long-term trajectory of bitcoin, it is undoubtedly bullish. Of course, this all depends on whether or not there will be a demand for additional bitcoin. Supply may be falling short, but it is all in vain if the demand side doesn’t live up to its end of the bargain.
And on that note, the last year has been a huge one. Not only has capital flown out of the space at an alarming rate, but several high-profile scandals (LUNA, Celsius, FTX, and so on) have rocked the space. The fear is that these episodes have damaged the reputation of the cryptocurrency space and will stall the demand for bitcoin on the intuitional side. Have people been barred from going to space?
it’s hard to say. But looking at the long term holders, their confidence seems firm.