Bitcoin is trending sideways in its current range, the cryptocurrency has successfully staved off another onslaught from the bears, but uncertainty remains high in the market. This status quo supports price developments and could be the dominant trend for the rest of the year.
As of this writing, Bitcoin is trading at $16,400. The cryptocurrency remained stuck at these levels for today’s trading session after retesting its yearly lows yesterday. Following the collapse of FTX, crypto users lost confidence. This could have a lasting impact on the nascent asset class.
Bitcoin holders flee exchanges
Data from crypto exchange Bitfinex indicates that users are withdrawing their Bitcoin from exchanges en masse. The FTX collapse triggered a massive outflow of BTC from trading platforms; investors fear losing their funds to contagion.
The chart below shows that the supply of BTC from exchanges has been declining since mid-2021. This trend intensified in 2022 when the crypto market crashed and Bitcoin lost over 80% of its value from its all-time high of $69,000.
Less bitcoin on trading platforms is a good thing in a different market. Market participants saw this as a bullish sign as individuals and institutions cannot sell their BTC. Thus, the bullish price momentum is less likely to encounter resistance.
However, current market conditions are different. The falling supply of Bitcoin on exchanges could indicate problems for the crypto market.
As noted by Bitfinex, crypto exchange Gemini saw the largest drop in its BTC supply. The exchange saw its Bitcoin reserves drop from 210,000 BTC to 163,000 in one week. Overall, trading platforms have lost over 1 million BTC in the past month. The report states:
These data suggest that a mass exodus of retailers from centralized exchanges is underway. Every development that suggests a particular exchange is in trouble is a catalyst for the depletion of balances on exchanges. This trend has been in place since the first rumors of FTX’s insolvency emerged.
To give up
In addition to the falling supply of BTC, the report notes discouragement among retail investors. These users might leave the crypto space for good after taking a hit on FTX.
The report noted no spike in self-custody wallet balances, as measured by the Whalemap monitor. The report noted:
Whale bubbles (BTC balance 1-10k) serve as local support and resistance, however, BTC whales are selling, and their current portfolio balances do not offset currency outflows (…). The conclusion for investors is that while the many black swan events can be considered behind us, the selling pressure from HODLers and whales continues to mount.
