Institutional accumulation and a shift toward self-custody have brought Bitcoin reserves on exchanges to a five-year low, setting the stage for potential supply shocks and increased price volatility.
According to data from CryptoQuant, the supply of Bitcoin on centralized exchanges has reached its lowest level since 2019. By the end of April 2025, only about 2.5 million BTC remained on the exchanges, representing a drop of 500,000 coins since the end of 2024.
Bitcoin supply on exchanges shows a shift toward self-custody
The decreasing supply of Bitcoin on exchange balance sheets is widely interpreted as a sign that more investors are transferring their BTC to private, self-custodial wallets. This behavior is often associated with long-term holding, or "HODLing," as investors withdraw coins from platforms where they could easily be sold.
The withdrawal of Bitcoin from exchanges is a trend that has been brewing since early 2023, when reserves hovered around 3.2 million BTC. This trend has accelerated over the past year with the participation of major institutional players.
Institutional demand could drive a global supply crisis
Institutional demand could lead to a supply shortage for Bitcoin, as large companies like Fidelity have made substantial purchases of Bitcoin. Fidelity alone recently acquired $253 million worth of BTC, contributing to the outflow of coins from exchanges. Bitcoin veteran Dennis Porter enthusiastically commented:
We've never seen this before. We've never had a global Bitcoin supply crisis. What optimism!
Renowned cryptocurrency trader Cas Abbe posted:
The supply of Bitcoin on exchanges is now at its lowest level since Q3 2018. There are currently 2.5 million $BTC on exchanges, a decrease of 500,000 compared to Q4 2024. A few days ago, Fidelity mentioned that institutions are steadily buying and withdrawing BTC from exchanges.
Supply 📉 + Demand 📈 = Price Explosion
According to a recent Coinbase survey, more than three-quarters of institutional investors plan to increase their digital asset allocations in 2025. Many are already using or exploring Bitcoin for portfolio diversification and as a hedge against macroeconomic uncertainty.
Publicly traded companies, led by Strategy, have also been aggressively accumulating Bitcoin, with over 425,000 BTC withdrawn from exchanges since November 2024 and nearly 350,000 BTC acquired by publicly traded companies.
How the decrease in Bitcoin supply on exchanges affects the market
The decreasing supply of Bitcoin on exchanges has several implications for the market, including less selling pressure. With fewer coins available for immediate sale, the risk of sell-offs decreases, helping to stabilize or even boost prices.
If demand continues to increase while supply remains limited, the market could also experience a supply shock, which has historically been a precursor to sharp price increases.
On-chain analyst Willy Woo posted:
BTC's fundamentals have turned bullish, which isn't a bad scenario for breaking all-time highs.
The transition to self-custody and long-term holding reflects a maturing cryptocurrency market, where both retail and institutional investors increasingly view Bitcoin as a strategic asset rather than a speculative bet.
The reduction in Bitcoin supply on exchanges is widely considered a bullish indicator. However, it also means that any sudden surge in demand could lead to increased price volatility. The coming weeks will determine whether this supply shortage translates into the next stage of Bitcoin's rally or whether market sentiment shifts as new macroeconomic data emerges.