Why it Matters: Exchanges See Record Low Supply of 1.45M BTC
Image courtesy of Unsplash.

Why it Matters: Exchanges See Record Low Supply of 1.45M BTC

When the year draws to an end, will we view BTC’s current price as a missed opportunity to buy the dip?
Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

Bitcoin’s recent price correction hasn’t shaken institutional investors from hodling. We’re seeing quite the opposite actually, according to a series of massive withdrawals from cryptocurrency exchanges.

Bitcoin Supply on Exchanges Reaches All-Time Low

Cryptocurrency market tracker, CryptoQuant, has recently revealed massive Bitcoin withdrawals from crytpo exchanges. The biggest one happened just yesterday from Coinbase, which can be see with the help of Bitcoin Explorer. These 12,000 BTC are worth $668.98 million at press time. Shortly after these transactions, Bitcoins withdrawn from exchanges further increased to 14,608 BTC.

This is a continuation of an ongoing trend noted over the last month, with just over 70k BTC withdrawn from exchanges. At the end of January 2021, the world saw how Bitcoin supply reached its lowest point at 2.36 million BTC held in total on cryptocurrency exchanges. Now, this has been exceeded further to only 1.45 million BTC.

Image credit: ViewBase.com

Keep in mind that some exchanges, like Binance, hold multiple cold wallets, so there will be differences in the total BTC supply you see at on-chain analysis platforms like Glassnode or CryptoQuant. Today’s withdrawal of 12k BTC is speculated by many to be a transfer between whales. Coinbase’s OTC desk is known to handle billions worth of BTC transfers for whales.

OTC Crypto Desks Are Not for Retail Crypto Peasants

For those unfamiliar, OTC – Over the Counter – desks are reserved for high net-value, institutional cryptocurrency investors who receive personalized service, asset custody and extra security. Mostly, they are integrated as an add-on to existing crypto exchanges, but some exist as specialized services like Paxos itBit.

If you recall, the topic of OTC brokers and desks is actually what Elon Musk inquired Michael Saylor of MicroStrategy about last year.

With OTC brokers, the VIP buyer would simply inform the brokerage about the willingness to buy a certain amount of BTC. After which, the broker would offer a price quote based on current market price moves. Then, the buyer would either decline or commit to the purchase.

The rest of the process is up to the broker to collect the BTC and arrange the transfer. OTC brokerages are BTC whales’ favorite tool to avoid slippage. This is the unfavorable difference between the price at the time the order is made, and the point of order settlement.

OTC principal desks avoid slippage because the accepted quote is the set price. Therefore, if the price goes higher after accepting the offer, the OTC principal desk takes that risk, not the buyer.  

What Does Low BTC Exchange Supply Mean?

According to Chinese blockchain analyst, Colin Wu, almost 93% of Bitcoin’s trading volume is conducted through OTC desks. Given the fact that Bitcoin’s price dropped by 6.7% in the last 48 hours or so, combined with record BTC withdrawals, many believe it’s safe to assume that whales intend to hodl.

In other words:

  • Institutional investors are not incentivized to sell off their Bitcoin, but hold it for the long haul instead.
  • More people understand that ownership of Bitcoin means owning your private key, which you give away when using centralized exchanges, making your assets an attractive target for cybercriminals.

As a result of this, amid continued devaluation of the USD by the Federal Reserve, Bitcoin exchange outflow volume is at its historic high.

Image courtesy of Glassnode.

Nonetheless, the remaining BTC exchange supply still stands at over $80 billion. A respectable sum for institutional investors who are yet to onboard the Bitcoin train toward the estimated $100k by the end of this year.

Does your family participate in cryptocurrency investing, or are you still the lonely outlier? If so, are they worried about inflation? Let us know in the comments below.

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