Analytics firm Glassnode has revealed that exchanges have not lost Bitcoin, at least not to the extent that many previously thought.
Bitcoin Exchange’s reserve has seen only a minimal decline in recent years
THE exchange balancea measure of the total amount of Bitcoin sitting in centralized exchange wallets, has often been a hot topic in the on-chain analyst community.
Investors use these platforms for selling purposes, which is why many consider the exchange balance as a kind of reflection of the “available” trading supply of the cryptocurrency.
In recent years, an interesting trend has emerged in this exchange supply, with the value steadily decreasing. This suggests that investors were continually withdrawing coins, reducing the potential supply of the asset to sell.
This trend has led some in the community to believe that Bitcoin is heading towards a supply shock. There was also opposition to this idea, however, with questions about whether the capital outflows were simply the result of changing market dynamics rather than an apparent shift towards broad-based growth. HOLDLER.
Glassnode’s change to one of its metrics may have just put an end to the supply shock theory. As the analyst firm explained in its changelogCoinbase balance has been updated to include new entities.
Previously, these labels were associated with Coinbase Custody in our database. However, we have decided to discontinue this distinction as the differentiation from an on-chain perspective is not always clear.
Coinbase’s custody service includes coins from large entities such as exchange-traded funds (ETFs) to cash. So, the result of this change is that Coinbase’s balance has now seen a notable increase.
The data for the Coinbase balance both before and after the modification | Source: Glassnode
As the chart shows, while the exchange balance previously appeared to be collapsing, the change has caused its value to move more or less sideways in recent years.
In an X jobOn-chain analyst Checkmate also weighed in on the topic. “Exchange balances are notoriously difficult to analyze and monitor,” the analyst explains. “It’s an advanced metric that’s only useful if you know what you’re doing.”
As Checkmate pointed out, the broader exchange rate chart also looks flat in recent years.
How the exchange balance has changed for BTC over its history | Source: @_Checkmatey_ on X
“A lot of people who talked about endless outflows didn’t appreciate the Bitcoin balance held by Coinbase,” Checkmate notes. In March 2020, the exchange’s total balance was 3.146 million BTC; today, it’s 2.968 million.
There have been some net outflows since then, but the drop is only 178,000 BTC, which is not much in the grand scheme of things.
BTC Price
At the time of writing, Bitcoin is trading at around $62,700, up more than 2% from last week.
Looks like the price of the coin has been going up over the last few days | Source: BTCUSD on TradingView
Featured image by Dall-E, Glassnode.com, chart by TradingView.com
