Amid the struggle between bulls and bears in the cryptocurrency market over the past week, the circulating supply of both Bitcoin (BTC) and Ethereum (ETH) has bottomed out, sparking speculations about the potential impact on the cryptocurrency market.
data Provided by Santiment, it reveals a significant drop in the amount of BTC and ETH held on exchanges, indicating a shift in investor behaviour.
The supply of Bitcoin and Ethereum is declining on exchanges
According to Santiment data, the circulating supply of BTC on exchanges is currently just 5.7%, the lowest since December 2017 when the cryptocurrency surged to an all-time high of $20,000.
Likewise, the supply of ETH on exchanges fell to 10.1%, the lowest level since its creation in 2015. This trend indicates that cryptocurrency investors are actively buying and withdrawing their coins from exchanges, and choosing alternative storage methods.
Santiment tweeted earlier today:
Bitcoin and Ethereum continue to see more and more of their existing supplies go into self-holding. Although not a perfect indicator, declining coins on the stock exchanges generally indicate future bullish waves, given enough time to play.
It is worth noting that oThe main reason behind the decline in the supply of BTC and ETH on exchanges, especially in the case of Ethereum, is the increasing popularity of staking. Ethereum 2.0’s transition to a Proof of Stake (PoS) consensus mechanism has given ETH holders the opportunity to share their coins and participate in securing the network while earning rewards.
Stakers lock their ETH in specialized wallets, ensuring that it is actively involved in the network’s operations rather than being left dormant on exchanges. This shift towards staking is driven by the desire to earn passive income and contribute to the long-term growth and security of the Ethereum ecosystem.
On the other hand, the decline of Bitcoin on the exchanges is not entirely clear, however, the possible reason can be attributed to investors looking to hold their BTC holdings for a long time. This may be due to the dreaded upcoming global recession which has led many to the idea of saving money for supposed “rainy days”.
The implications for the crypto market
The dwindling supply of Bitcoin and Ethereum on exchanges could have significant effects on the broader cryptocurrency market, mostly positively. First, it indicates a decrease in selling pressure as fewer coins are available for circulation. And according to Santiment, this “hints at upside trends ahead.”
With limited supply on the exchanges, potential buyers may have more difficulty obtaining these digital assets, driving up demand and potentially driving up the prices of both Bitcoin and Ethereum.
In addition, the decrease in the presence of BTC and ETH on exchanges may indicate a growing confidence among long-term coin holders. Investors are likely to become more inclined to hold their coins in safe wallets or participate in a loss-making process, which indicates belief in the potential future value and value of these cryptocurrencies.
This shift in behavior reflects a maturing market where participants are increasingly focused on underlying technology and long-term prospects rather than short-term trading.
Regardless, both BTC and ETH did not make any significant movement in the past week. BTC’s price witnessed a slight upward trend of 0.3%. BTC jumped from $26,819 last Saturday to trade as high as $27,000 on Thursday.
In contrast, ETH’s price witnessed a slight upward trend of 0.6% in the past week. ETH has risen from a low of $1,795 last Saturday to trading above $1,800 at the time of writing.
Featured image from Shutterstock, chart from TradingView