Many people tend to keep their cryptocurrency balances on an exchange. As far as Bitcoin is concerned, that situation is changing. Less and less funds is found in exchange wallets, resulting in the lowest exchange reserves in over a year.
Exchange Reserves in Bitcoin Dry up
It is not entirely abnormal to see fewer BTC being held in exchange reserves. Not because the companies are doing something wrong, but it simply isn’t the more secure option. Owning Bitcoin offers freedom, but it also comes with responsibilities. One such responsibility is moving money off an exchange as quickly as possible. Unless one aims to trade frequently, there’s no reason to keep crypto assets on a trading platform longer than need be.
Statistics by CryptoQuant paint an interesting picture. It depicts the amount of BTC being held in exchange wallets. As such, this gives an overview as to how the exchange reserves look at any given moment. Looking at the chart, it is evident that these figures are on a constant decrease. A welcome change, as people need to learn about keeping funds safe at all costs.
What is interesting is how the current Bitcoin price doesn’t seem to affect the numbers. In fact, the exchange reserves have been on a continuous decline since mid-March 2020. It is unclear what triggered this shift at that time. With Bitcoin dipping hard, one would expect there to be more BTC on exchanges.
Instead, it has resulted in fewer funds residing on trading platforms. The exchange reserves decreased from 2.785 million BTC at the time to 2.3973 million BTC today. A net 390,000 BTC decrease is quite significant.
What Does This all Mean?
Interpreting the data is one thing, but drawing conclusions is a different matter. Several factors may be at play to explain this ongoing trend. It is certainly possible that more people are putting Bitcoin into personal wallets for the long haul. Unlike most other cryptocurrencies, Bitcoin is still a long-term investment first and foremost.
Another option is how people might be using Bitcoin to explore DeFi opportunities. While it still requires some hurdles to go through, passing up on this potential revenue is difficult. Opinions on decentralized finance solutions are still rather divided. A lot of unaudited projects have come to market, potentially putting users’ funds at risk.
Regardless of the reason, this is a significant trend. Moving Bitcoin off exchanges is a trend that should have taken place years ago. Slowly but surely, community members see the benefits of doing so. It will take a while until exchange reserves drop below 2 million BTC, When that happens, however, the industry will be much better off.
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