Analytics firm Glassnode has revealed that the exchange has been bleeding Bitcoin, at least not to the extent that many previously thought.
The Bitcoin Exchange Reserve Has Seen Only A Small Decline In Recent Years
Exchange balance, a measure of the total amount of Bitcoin sitting in the wallets of a centralized exchange, used to be a hot topic in the on-chain analysis community.
Investors use these platforms for purposes related to trading, so many consider the balance of the exchange as a form of showing the “available” trade supply of cryptocurrency.
In recent years, an interesting pattern has emerged in this supply sitting on the market, with its value seeing a steady decline. This suggested that investors have been withdrawing the coins, thereby reducing potential sales of the asset.
This trend has caused some members of the public to think that Bitcoin is headed for a commodity shock. However, there was also opposition to this view, with questions about whether this exit was due to market fluctuations rather than an obvious shift in widespread HODLing.
Glassnode’s conversion to one of its indexes may have just put the supply shock theory to rest. As the analytics company explained in its changelog, Coinbase’s balance has been updated to include new entities.
Previously, these labels were associated with Coinbase Custody in our database. However, we decided to stop this distinction since the division of the on-chain perspective is not always clear.
Coinbase Custody includes coins from major companies such as exchange-traded funds (ETFs). Therefore, the result of this change is that the Coinbase balance has now seen a significant increase.
The data for the Coinbase balance both before and after the modification | Source: Glassnode
As can be seen from the chart, while the balance of exchange appears to be declining in the past, the reversal means that its value has more or less moved sideways over the past few years.
In X’s post, on-chain analyst Checkmate also addressed the topic. “Exchange balances are notoriously difficult to analyze and monitor,” the analyst said. “It’s not an important metric, only if you know what you’re doing.”
As Checkmate points out, the broad exchange rate chart has also looked flat in recent years.
How the exchange balance has changed for BTC over its history | Source: @_Checkmatey_ on X
“A lot of people who were talking about infinite withdrawals were not happy with the Bitcoin balance stored in Coinbase’s stock,” Checkmate noted. In March 2020, the total exchange balance was 3.146 million BTC; today, it is 2.968 million.
Since then there have been net outflows, 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 around $62,700, up more than 2% over the past week.
Looks like the price of the coin has been going up over the last few days | Source: BTCUSD on TradingView
Featured image from Dall-E, Glassnode.com, chart from TradingView.com
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