BTC and ETH supply on exchanges has fallen to multi-year lows

What’s new? From July 11 to August 11, 99 308 bitcoins worth $5,96 billion were withdrawn from centralized cryptocurrency exchanges (CEXs). According to analytics platform CryptoQuant, the volume of coins on such platforms dropped to 2 679 880 bitcoins worth $161 billion. The last time such low reserves on CEXs were recorded during the bear market on November 19, 2018.

CryptoQuant data

What else is known? After the 2018 low, the number of BTC on exchanges began to recover, reaching a record high of 3 374 491 by July 23, 2021. Then by June 6, 2022, the figure dropped again, to 3 356 772 BTC. Amid the collapse of the Terra blockchain ecosystem in May 2022 and the FTX crypto exchange in November of the same year, the number of bitcoins on CEXs gradually fell by more than 20% to current levels.

The supply of native coins of the Ethereum (ETH) blockchain on exchanges has also shrunk to multi-year lows. Platforms now hold about 16,8 million coins, down by 53% from the record set on June 4, 2020 (35,44 million ETH).

Since Ethereum switched to the Proof of Stake (PoS) consensus algorithm as a result of The Merge upgrade on September 15, 2022, 11,44 million ETH has been withdrawn from the platforms. These coins are currently valued at $29,97 billion.

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Last week, cryptocurrency exchange rates fell to the lowest mark for the last five months. Thus, bitcoin fell below $50 000 and Ethereum fell below $2200. However, since August 5, bitcoin has added 19% and is currently trading at $59 170, while ETH has risen 21% to $2649.

The continued decline in the supply of BTC and ETH on exchanges may indicate the growing popularity of non-custodial solutions designed for self-storage of cryptocurrencies without the involvement of an intermediary in the form of CEXs. As more users favor self-storage, crypto assets become less liquid on exchanges, increasing their scarcity, and potentially increasing their value over time.

That said, it is worth noting that last week, a group of researchers and developers discovered a new method for hacking hardware bitcoin wallets that allows hackers to reconstruct seed phrases from fragments of transaction code.