In good news for an orange Christmas, Bitcoin (BTC) supply is dwindling to levels not seen in years. According to a recent tweet by CryptoRank, cryptocurrency exchanges own only 6.3 percent of the total Bitcoin supply, or 1.3 million BTC.
The diminishing supply is nothing new, since it has been moving downward since Bitcoin’s halving in 2020, when the BTC block reward was slashed in half. BTC availability on exchanges followed suit, gradually declining over the last year. Exchange wallets accounted for 9.5 percent of the BTC supply in October 2020, shortly before the all-time highs during the 2020 Christmas season, and 7.3 percent in July this year. The December result of 6.3 percent is the lowest since 2021.
Surprisingly, Coinbase’s dominance in BTC wallets is also eroding. The American exchange used to have more BTC than the rest of the exchanges combined. Over the last year, its dominance has dipped from 50.52 percent to 40.65 percent.
The news comes on the heels of a slew of positive price measures that correspond to Bitcoin’s higher price movement. For starters, the illiquid BTC supply has frozen for the winter, with the BTC supply transitioning from a “liquid” to a “illiquid” condition presently at 100,000 BTC every month. In essence, more BTC is locked up in cold storage than is mined.
Glassnode, an on-chain analytics startup, released more encouraging news on exchange behaviour. The seven-day moving average for BTC exchange inflow volume recently hit a 5-month low of 978.452 BTC and has been drifting downward week on week. The exchange supply shortage may worsen if less and fewer BTC are supplied to exchanges.
Furthermore, many retail investors and certain businesses store their BTC on exchanges, implying that the ‘illiquid’ BTC may be considerably lower. Some Bitcoin hodlers prefer to leave the custody of their keys to exchanges rather than storing their Bitcoin offline in cold storage.
Despite the best efforts of Bitcoiners like Andreas Antonopolous to ensure ‘not your keys, not your Bitcoin’ is part of everyday BTC motto, Binance CEO and co-founder Changpeng Zhao has pushed the hot wallet practice.
As a result, while 1.3 million BTC are held on exchanges, they may not be circulating and may contribute to the illiquid supply.
Even so, despite calls for a “Santa Rally” in response to bullish statistics, the bears are not out of the woods just yet. According to a tweet from BullRun Invest based on Glassnode statistics, 24.6 percent of all BTC supply is above the $47,000 mark.
It implies that nearly a quarter of the BTC purchased at those prices is currently underwater. If BTC fails to reach the 50s, there may be fewer presents under the tree tomorrow.