21 Dec 2021

Declining exchange balances, but growth in other tradeable bitcoin instruments

In 2021, bitcoin has experienced some large changes to the location of its circulating supply, with “Ethereum-bitcoin”, corporate treasuries, and exchange-traded investment vehicles being the major beneficiaries.
Source: Bytetree, Coinmetrics, MicroStrategy, Square, Aker, Meitu, Tesla, Defipulse, Glassnode
In 2021, the bitcoin exchange balance relative share to the circulating supply has declined by 1.19pp.Meanwhile, the exchange-traded investment vehicles share of the circulating supply increased by 0.69pp this year. This indicates a rising demand for trading bitcoin through familiar trading infrastructure and also points towards increasing institutional adoption of bitcoin throughout the year.Meanwhile, bitcoin used on the Ethereum network has seen further growth this year. Currently, 1.73% of the circulating bitcoin supply is at work on Ethereum, with WBTC being the largest contributor to the growth.Bitcoin on Ethereum and exchange-traded bitcoin vehicles are frequently traded liquid instruments, contributing to bitcoin’s price discovery. In other words, growth in these two categories does not necessarily support the popular supply-shortage narrative in bitcoin. Additionally, now 0.91% of the circulating bitcoin supply is held by corporate treasuries, up from 0.40% last year. MicroStrategy accounts for more than half of the growth in this segment in 2021. Supply that has remained idle for five years or more now accounts for 23.23% of the circulating bitcoin supply. If all idle coins aged four years old or more remained idle this year, this number would’ve been 24.89%, illustrating that some long-term holders have likely realized profits throughout the year.
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