According to data, Bitcoin balances on the exchanges are shrinking sharply and have dropped to levels not seen in two years. Arcane Research announced that charts showing the number of Bitcoin exchanges have fallen sharply and have been "one of the main stories of the year". Meanwhile, onchain metrics indicate that a number of older coins will be sold as Bitcoin's value increases.
Bitcoin on exchanges has fallen 21% since February
In 2020, many cryptocurrencies will be held on exchanges. However, the total number of Bitcoin (BTC) held on trading platforms has decreased immensely this year. According to Glassnode's onchain statistics, BTC held on exchanges hasn't been as low as it is today since 2018.
From January 2018 to February 2020, the total number of BTC held on exchanges increased. However, since February, Bitcoin held on exchanges has declined 21.66% and remains at levels not seen in two years.
On Tuesday, Arcane Research tweeted about the BTC exiting the exchanges and shared a chart with the data captured by Glassnode. "One of the main stories of the year was the sharp drop in the aggregate BTC exchange rate," Arcane tweeted. "After moving sideways in November, the BTC exchange rate fell again," the researchers added.
Data suggests that cryptocurrency owners may be opposed to cryptocurrency exchanges following the recent Kucoin hack and withdrawal issues at Okex. While some people point out that new buyers are becoming long-term owners and assume that the trend towards self-custody will continue to drive demand.
"Bitcoin exchange rate balances are falling at a rate that has never been seen before in history," tweeted the Youtuber Crypto Daily in October. "This means that fewer people want to speculate in the short term – bullish." While November levels stagnated, the BTC decline on exchanges increased in the first week of December.
Researchers say long-term owners who make profits at this stage are optimistic
In addition to the recent decline in BTC in foreign exchange reserves, onchain research shows that older coins will be sold when the price rises. "While this may seem alarming," explained Liesl Eichholz from Glassnode. "This trend has historically been extremely bullish."
Eichholz went on to say that the researchers used the entity-adjusted ASOL (Average Spent Output Lifespan) of the Bitcoin network. The data provides an overview of older coins that will be issued when the price of BTC increases. As of late November, statistics show that long-term owners have made profits.
Regardless of what people think, according to the Glassnode employee, it's not a bearish signal that Long Term Owners (LTH) are making profits at this stage of the game.
“As a result of this trend, the total offer from long-term owners usually falls well before the market peaks – and accordingly the entire LTH offer in profit," writes Eichholz. “The sharp decline in the entire LTH supply shown above makes intuitive sense. As these long-term owners make profits, they leave new retail investors room to enter the market that has historically propelled Bitcoin's biggest bull markets. "
In short, there seems to be a large number of people removing BTC from exchanges and some of these cases are sure to be new long-term owners, but how many are uncertain. In addition to this data, Glassnode's report on existing LTH subscribers shows that many "BTC habitually accumulate in bear markets and then realize their profits on the way up but mostly at the top".
"If the price of BTC is following this historical trend, it suggests that we expect further price increases before the top is reached," concluded Eichholz.
What do you think of the number of bitcoin exchanges in 2020 and long term holders making profits to amass more bitcoin? Let us know what you think on this matter in the comments section below.
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