29 Mar 2021

BTC exchange balance still declining – But why?

The bitcoin exchange balance has continued to decline, with the exchange balance sitting at 2.4m BTC, down 600,000 BTC in one year.
btc exchange balance.svg
Source: Glassnode
In March 2020, the aggregated bitcoin exchange balance sat at 3 million BTC. A year later, the exchange balance has declined by 600,000 BTC. Where have these coins been moved? As previously shown, 800,000 BTC is currently held in bitcoin investment vehicles. Rewinding one year back, we find that this sector held 350,000 BTC. Bitcoin investment vehicles have thus seen a growth of 450,000 BTC over the last year, contributing significantly to the declining exchange balance with institutional investors loads of bitcoin. Institutional adoption has not been the only defining trend in crypto in the last year twelve months. The DeFi sector blossomed, and with it, a bunch of bitcoin was moved to ERC-20 protocols. Over the last year, BTC at work on Ethereum has grown by 180,000 BTC. With DeFi and bitcoin investment vehicles accounted for, we have found a path for 630,000 BTC likely to be previously held at exchanges. These two trends could be the main explanation for the increased scarcity of bitcoin on exchanges. When we also consider the large bitcoin purchases from listed companies such as MicroStrategy and Tesla, it becomes clear that some large entities are also depositing bitcoin to exchanges during this bull run.
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