Bitcoin (BTC) are held by leading crypto exchanges such as Coinbase, Binance and Kraken vicinity a six-year low, CryptoQuant data as of September 20 shows.
The decline came as the broader market stabilized after posting sharp losses in the second half of August and the first half of September. As of September 20, BTC prices are still below $30,000, although there has been significant sideways movement in recent weeks.
Bitcoin foreign exchange reserves are declining. Source: CryptoQuant
Bitcoin reserves on exchanges are falling
According to the trackers, exchanges control 2.09 million BTC at the time of writing. In total, the Bitcoin network will issue 21 million coins.
However, in 2023 there are over 19.7 million copies in circulation, and publicly traded companies such as Tesla – the electric car maker – and MicroStrategy – the business intelligence company – have increased. Generally, companies can hold cryptocurrencies in non-custodial wallets or exchanges such as Binance or Coinbase.
Exchanges offer custodial wallets where users can store their coins for trading or even HODL. Users who hold their coins on exchanges can easily exchange them for USDT or other altcoins. As mentionedthe number of coins held on exchanges continues to decline – which may be bullish on the surface, but doesn’t necessarily mean prices will recover.
Typically, coin outflows from exchanges can indicate a firming market and expectations of a price increase. However, given the current regulatory environment, traders and Bitcoin holders may prefer to take control of their coins when fear arises.
Accordingly, more and more holders are securing their coins in their non-custodial wallets as a protective measure, which may explain the declining Bitcoin foreign exchange reserves.
Bitcoin price on September 20th| Source: BTCUSDT on Binance, TradingView
Bitcoin price on September 20th| Source: BTCUSDT on Binance, TradingViewSEC, regulators crack down on exchanges
The number of Bitcoins held on exchanges has declined throughout 2022, but appeared to have fallen even faster at the end of 2022. Around this time, FTX, a popular crypto exchange, collapsed, locking up billions worth of customer funds.
The outflow slowed in the first quarter of 2023 following the collapse of some regional banks in the United States, but has continued to decline since then. The decline is due to the bear market, but above all because the US Securities and Exchange Commission (SEC) is taking action against Binance and Coinbase, accusing them of non-compliance.
In June, Binance and Coinbase were sued by the SEC. The regulator claimed that the two exchanges issued unregistered securities, citing some exchanges such as Cardano (ADA) as examples.
Amid this crackdown, Binance US took center stage. Since then, there have been extensive staff layoffs, layoffs and business interruptions. The trading volume in Binance US is now down by over 95%.
Feature image from Canva, chart from TradingView
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