The Bitcoin balance on exchanges has plunged, reaching a low of below 1.8 million BTC. This decrease, as a result, in available Bitcoin on exchanges has prompted a closer examination of the trend within the cryptocurrency market, specifically focusing on the implications for supply and demand.
Dramatic Drop in Bitcoin Exchange Balances
Ever since spot Bitcoin exchange-traded funds (ETFs) emerged in the United States, the cryptocurrency market has seen a large decrease in Bitcoin balances on exchanges. According to Glassnode, an on-chain analytics firm, since January 11, more than 136,000 BTC, equivalent to almost $10 billion, has been withdrawn from exchanges. This pattern points to a noticeable change in cryptocurrency behavior, showing the tendency of BTC holders to withdraw and keep their Bitcoins off the exchange.
Bitcoin supply on exchanges ( Source: Coinglass)
Moreover, according to Coinglass, as of March 29, the BTC balance on the exchanges was around 1,770,297. As of March 28, Coinbase had reported the lowest Bitcoin balance since April 2018, holding a total of 2,320,458 BTC. This trend, of which there are no indications of diminishing, was further proven on March 27 when exchanges suffered withdrawals of over 22,000 BTC, which would be about $1.54 billion.
The upcoming Bitcoin halving event, scheduled for mid-April, is another critical factor influencing the market. This development will cut the block reward for miners and, hence, bring it down to a point where the new BTC entering the market is slowed.
With the block subsidy halving, the Bitcoin supply will only grow by 3.125 BTC per newly mined block, which is much less than the current rate. This decline in the new supply, combined with powerful buying pressure, could result in a supply squeeze, affecting the availability and possibly price of Bitcoin.
Potential for a Supply Crunch
The current trends in Bitcoin exchange balances and the factors influencing them have led to speculation about a potential supply crunch. With only 1,770,000 BTC left on exchanges, the availability of Bitcoin for buyers becomes a growing concern, especially in light of the strong institutional demand, as shown by the spot ETF inflows.
The largest inbound transfer of stablecoin USD Coin (USDC) to Coinbase, as noted by J.A. Maartunn of CryptoQuant, further highlights the increasing demand for Bitcoin. This demand, combined with the forthcoming halving event and the decreased rate of new Bitcoin entering the market, suggests a tightening of supply.
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