Bitcoin exchange reserves drop to multi-year low amid rising institutional demand: CryptoQuant

Bitcoin BTC -1.65% exchange reserves have reached their lowest levels ever recorded by CryptoQuant data dating back to October 2021.

According to the data , more than 51,000 bitcoin have been withdrawn from major cryptocurrency exchanges over the past month. This trend is reducing the liquid supply of bitcoin and suggests that investors are withdrawing their coins as part of a long-term holding strategy.

This outflow of bitcoin from exchanges to cold storage has been a multi-year-long trend, possibly driven by the rise in the digital asset's price and factors such as the approval of spot bitcoin ETFs and anticipation surrounding the bitcoin halving event.

In October 2021, bitcoin exchange reserves hovered around the 3.2 million mark, indicating a decrease of approximately 590,000 coins since CryptoQuant started recording this metric.

Bitcoin exchange reserves have fallen to a record low. Image: CryptoQuant.

"Bitcoin exchange reserves have declined this year because of Mt. Gox distribution to creditors, as our total exchange reserve data included Mt. Gox reserves, and Coinbase exchange reserve declining, removing the potential sell pressure on bitcoin from these coins," CryptoQuant Head of Research Julio Moreno told The Block.

Moreno noted that CryptoQuant data indicates the declining Coinbase bitcoin reserves are primarily being moved to custody in specific wallets, possibly from institutional players, rather than staying on the exchange. "In the case of Coinbase, bitcoin going into custody signals growing demand from institutional players, such as companies and spot exchange-traded funds," Moreno added.

However, Moreno also noted that if Mt. Gox and Coinbase reserves are excluded, the overall exchange reserve levels for 2024 appear relatively flat, suggesting that the current decline is largely concentrated in these two sources.

Excluding Mt. Gox and Coinbase, Bitcoin exchange reserves seem mostly flat in 2024. Image: CryptoQuant.

Increased buying pressure from new bitcoin whales

The reduction in exchange reserves coincides with a surge in bitcoin accumulation by new institutional players.

CryptoQuant data shows that new institutional wallets, that exclude miners and exchanges, have increased their accumulation of bitcoin in the past 30-day window. "The buying pressure from this new accumulation is something we haven't seen before. New whales are pushing bitcoin prices higher as they buy more. Right now, these new whales hold 1.97 million bitcoin. It's worth mentioning that this isn't just from the spot bitcoin exchange-traded funds, there are also other whales are involved," CryptoQuant community analyst J.A. Maartunn told The Block.

According to analysis sent to The Block, this level of accumulation can be currently seen on order books, with "intense buying pressure on Coinbase and Bitfinex, while Binance and Bybit continue to be predominantly short." CryptoQuant noted that this disparity highlights a dynamic where large investors are steadily accumulating coins, while smaller investors have been reducing their positions. This trend, according to CryptoQuant analysts, often exhausts the retail selling force, which may later scramble to repurchase bitcoin at higher prices when market sentiment turns more positive.

New bitcoin whales have begun to accelerate their accumulation of bitcoin. Image: CryptoQuant.

"On the other hand, institutional players have been building their positions before this improvement in sentiment arrives, which will cause them to distribute in the next price increases," CryptoQuant analysts said.

CryptoQuant defines new whales as wallets holding over 1,000 bitcoin, with an average coin age of under 155 days that are not centralised exchanges or miners.

Bitcoin’s price traded flat over the past 24 hours and was sitting at around $67,200 at 7:12 a.m. ET, according to The Block’s Bitcoin Price Page .